GHL System Berhad Annual Report 2018

G H L S y s t e m S B e r h a d ( 2 9 3 0 4 0 - D ) 142 NOT ES TO THE F I NANC I A L STAT EMENTS 3 1 D e c e m b e r 2 0 1 8 C O N T ’ D 32. CAPITAL AND FINANCIAL RISK MANAGEMENT (cont’d) (b) Financial risk management The financial risk management policy of the Group and of the Company is to ensure that adequate financial resources are available for the development of the operations of the Group and of the Company whilst managing its financial risks, including credit risk, liquidity and cash flow risks, interest rate risk and foreign currency risk. The Group and the Company operate within clearly defined guidelines that are approved by the Board and the Group’s and the Company’s policy is not to engage in speculative transactions. (i) Credit risk Cash deposits and trade and other receivables could give rise to credit risk which requires the loss to be recognised if a counter party fails to perform as contracted. The counter parties are creditworthy counterparties. It is the policy of the Group to monitor the financial standing of these counter parties on an ongoing basis to ensure that the Group is exposed to minimal credit risk. The primary exposure of the Group to credit risk arises through its trade receivables. The trading terms of the Group with its customers are mainly on credit, except for new customers, where deposits in advance are normally required. Overdue balances are reviewed regularly by senior management. The credit risk concentration profile has been disclosed in Note 21 to the financial statements. (ii) Liquidity and cash flow risks The funding requirements of the Group and of the Company and their liquidity risk are managed with the objective of meeting business obligations on a timely basis. The Group and the Company monitor their cash flows and ensure that sufficient funding is in place to meet the obligations as and when they fall due. The Group actively manages its debt maturity profile, operating cash flows and availability of funding so as to ensure that all operating, investing and financing needs are met. In executing its liquidity risk management strategy, the Group measures and forecasts its cash commitments and maintains a level of cash and cash equivalents deemed adequate to finance the activities of the Group. The analysis of financial instruments by remaining contractual maturities has been disclosed in Notes 25 and 28 to the financial statements respectively. (iii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the financial instruments of the Group and of the Company would fluctuate because of changes in market interest rates. The exposure of the Group and of the Company to interest rate risk arises primarily from their borrowings. The interest profile and sensitivity analysis of interest rate risk have been disclosed in Notes 22 and 25 to the financial statements respectively. (iv) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument would fluctuate because of changes in foreign exchange rates. Subsidiaries operating in Australia, Philippines and Thailand have assets and liabilities together with expected cash flows from anticipated transactions denominated in foreign currencies that give rise to foreign exchange exposures. The Group also hold cash and cash equivalents denominated in foreign currencies for working capital purposes. The sensitivity analysis for foreign currency risk has been disclosed in Notes 21, 22, 25 and 28 to the financial statements respectively.