b'108 Mercia Asset Management PLC Annual Report and Accounts 2021Notes to the consolidated financial statements continued30. Financial risk management continuedMarket risk continuedCredit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. A default is defined as the failure to discharge a contractual obligation or commitment into which a counterparty has entered with the Group. The Group is exposed to this risk for various financial instruments; for example, by granting receivables to customers and from placing cash and deposits with banks. The Groups trade receivables are amounts due from the investment funds under management, from those investee companies held by its managed funds and from its directly invested portfolio companies. The Groups maximum exposure to credit risk is limited to the carrying amount of trade receivables net of provisions, cash and cash equivalents and short-term liquidity investments as at 31 March, as summarised below:as at As at31 March 31 March2021 2020000 000Net trade receivables 314 372Cash at bank and in hand 54,491 23,971Short-term liquidity investments 234 6,21555,039 30,558The Directors consider that all the above financial assets are of good credit quality. In respect of trade and other receivables, the Group is not exposed to significant risk as the principal customers are the investment funds managed by the Group, and in these the Group has control of the banking as part of its management responsibilities. As at 31 March 2021, an amount of 285,000 (2020: 205,000) has been estimated as a loss allowance in accordance with IFRS 9.The credit risk of cash and cash equivalents and short-term liquidity investments held on deposit is limited by the use of reputable UK banks with high-quality external credit ratings and as such is considered negligible. All cash, cash equivalents and short-term liquidity investments are held with banks with an A rating as at the year ended 31 March 2021.Capital risk managementThe Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to shareholders through the optimisation of any debt and equity balance. The Board reviews the capital structure of the Group on a regular basis to ensure that it complies with all regulatory capital requirements.The capital structure of the Group consists solely of equity (comprising issued capital, reserves and retained earnings). The Group had no debt instruments during the year. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares, sell assets to manage cash or adjust the amount of dividends paid to shareholders. Fair value measurementsThe fair values of the Groups financial assets and liabilities are considered a reasonable approximation to the carrying values shown in the consolidated balance sheet. Subsequent to their initial recognition at fair value, measurements of movements in fair values of financial instruments are grouped into Levels 1 to 3, based on the degree to which the fair value is observable. The fair value hierarchy used is outlined in more detail in note 2 to these consolidated financial statements.The following table gives information about how the fair values of these financial assets and financial liabilities are determined and presents the Groups assets measured at fair value as at 31 March 2021. There have been no movements in financial assets or financial liabilities between levels during the current or prior years. The table in note 19 of these consolidated financial statements sets out the movement in the Level 1 and 3 financial assets from the start to the end of the year.as at As at31 March 31 March2021 2020000 000assets:Financial assets at fair value through profit or loss (FVtPL)Level 1 4,488 475Level 2Level 3 91,732 86,99696,220 87,471'