Excel Force MSC Berhad Annual Report 2016

EXCEL FORCE MSC BERHAD ANNUAL REPORT 2016 106 Notes to the Financial Statements 31 December 2016 (cont’d) 32. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (iii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates. The Group’s exposure to changes in interest rates relates primarily to the Group’s deposits with banks and interest bearing debt obligations. The Group does not use derivative financial instruments to hedge its risk but regularly reviews its debt portfolio to enable it to source low interest funding. The Group’s deposits are placed at fixed rates and management endeavours to obtain the best rate available in the market. Sensitivity analysis for interest rate risk The following table demonstrates the sensitivity of the Group and the Company if interest rates at the end of reporting period changed by fifty (50) basis points with all other variables held constant: Group Company Profit after tax Profit after tax 2016 2015 2016 2015 RM RM RM RM Deposits with licensed banks and short term funds - 50 basis points higher +51,470 +41,523 +50,223 +40,293 - 50 basis points lower -51,470 -41,523 -50,223 -40,293 Term loan - 50 basis points higher -21,704 -25,098 -21,704 -25,098 - 50 basis points lower +21,704 +25,098 +21,704 +25,098