GHL System Berhad Annual Report 2019

G H L S Y S T E M S B E R H A D 1 9 9 4 0 1 0 0 7 3 6 1 ( 2 9 3 0 4 0 - D ) 166 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 CONT’D 33. CAPITAL AND FINANCIAL RISK MANAGEMENT (cont’d) (b) Financial risk management (cont’d) (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 20 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 13, 25 and 27 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) Price risk Price risk is the risk that the fair value of future cash flows of the financial instruments of the Group and of the Company would fluctuate because of changes in market prices (other than interest or exchange rates). The Group and of the Company is exposed to price risks arising from investment held by the Group and of the Company. The investment is comprising unquoted unit trusts in Malaysia. During the financial year, the maximum exposure of the Group and of the Company to market risk is represented by the total carrying amount of the investment recognised in the statement of financial position, which amounted to RM53,270,574 (2018: RM42,833,438) and RM42,164,039 (2018 : RM42,732,647) respectively. There has been no change to the exposure of the Group and of the Company to market risk or the manner in which the risk is managed and measured.