Frontken Corporation Berhad 200401012517 (651020-T) • ANNUAL REPORT 2023 144 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 28. FINANCIAL INSTRUMENTS (CONT’D) (a) Financial Risk Management Policies (Cont’d) Market Risk (Cont’d) (iii) Equity price risk The exposure to equity price risk arises mainly from changes in quoted investment prices of the Group. The Group manages its exposure to equity price risk by maintaining a portfolio of equities with different risk profiles. Equity Price Risk Sensitivity Analysis If prices for quoted investments at the end of the reporting period strengthened by 10% (2022: 10%) with all other variables being held constant, the Group’s and the Company’s profit after taxation would have increased by RM3,264,766 and RM1,736,961 (2022: RM1,198,567 and RM750,141) respectively. A 10% (2022: 10%) weakening in the quoted prices would have had an equal but opposite effect on the Group’s and the Company’s profit after taxation. Credit Risk The exposure to credit risk, or the risk of counterparties defaulting, arises mainly from receivables. The Group and the Company manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other financial assets (including quoted investments, cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. Also, the Company’s exposure to credit risk includes loans and advances to subsidiaries, and corporate guarantee given to financial institutions for credit facilities granted to certain subsidiaries. The Company monitors the ability of the subsidiaries to serve their loans on an individual basis. (i) Credit risk concentration profile The Group’s major concentration of credit risk relates to the amounts owing by 2 (2022: 2) customers which constituted approximately 34% (2022: 27%) of its total trade receivables (including related parties) as at the end of the reporting period. (ii) Maximum exposure to credit risk At the end of the reporting period, the maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statement of financial position of the Group and of the Company after deducting any allowance for impairment losses (where applicable). In addition, the Company’s maximum exposure to credit risk also includes corporate guarantees provided to its subsidiaries as disclosed under the liquidity risk’s ‘Maturity Analysis’ of item (i) below, representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period. These corporate guarantees have not been recognised in the Company’s financial statements since their fair value on initial recognition were not material.
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