4 FINANCIAL RISK MANAGEMENT (a) Financial risk management policies The Group is exposed to market risk (including foreign currency exchange risk, commodity price risk and finance rate risk), credit risk and liquidity risk arising from its business activities. The Group’s overall risk management strategy seeks to minimise adverse effects from the unpredictability of financial markets on the Group’s financial performance. The Group uses relevant derivative financial instruments to hedge the risk of such commercial exposure and ensure the implementation risk action plans to effectively mitigate the risks. The Board of Directors has overall responsibility for the oversight of financial risk management which includes risk identification, operational or strategic, and the subsequent action plans to manage these risks. Management is responsible for identifying, monitoring and managing the Group’s risk exposures. Market risk (i) Foreign currency exchange risk The Group operates internationally and is exposed to foreign currency exchange risk arising from various currency exposures, primarily with respect to the United States Dollar (“USD”). The Group manages its currency exposure through foreign currency forward contracts. As at 31.12.2021, a 10% weakening of the USD against Malaysia Ringgit (“RM”) at the date of statement of financial position would increase the Group’s profit after tax of approximately RM11,077,000. As at 31.12.2020, a 10% weakening of the USD against Malaysia Ringgit (“RM”) at the date of statement of financial position would reduce the Group’s loss after tax of approximately RM5,536,000. The above exposure mainly as a result of foreign exchange gains/losses on translation of payables. The analysis assumes that all other variables remain constant. (ii) Commodity price risk The Group is exposed to raw sugar prices which are subject to fluctuations due to unpredictable factors such as weather, change of global demand and global production. Management is responsible for managing the Group’s exposure to raw sugar input cost against selling prices of refined sugar set by the Government. Management meets regularly to review their raw sugar requirements and price trends and then decides when to buy and price raw sugar consignments so that a refining margin is locked to ensure budgeted profits are met. In addition, the Group enters into NewYork 11 raw sugar future contracts to manage its raw sugar purchase cost. A sensitivity analysis has been performed based on the Group’s exposure to sugar futures as at year end. If price of raw sugar increases or decreases by 10% with all other variables held constant, the Group’s profit after tax and equity would decrease or increase by RM10,846,000 (2020: loss after tax and equity would decrease or increase by RM6,845,000). NOTESTOTHE FINANCIAL STATEMENTS FORTHE FINANCIALYEAR ENDED 31 DECEMBER 2021 SUSTAINABILITY JOURNEY HOWWE ARE GOVERNED FINANCIAL STATEMENTS ADDITIONAL INFORMATION 309
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