Kimlun Corporation Berhad Annual Report 2019

Annual Report 2019 Kimlun Corporation Berhad NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2019 (cont’d) 148 33. Fair value (cont'd) (b) Guarantees 34. Financial risk management objectives and policies The Group and the Company do not undertake any trading of derivative financial instruments. (a) Credit risk An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximations of fair value (cont'd) The Group and the Company minimise and monitor its credit risk by strictly limiting the Group's and Company's associations to business partners with high creditworthiness. Receivable balances and contract assets are monitored on an ongoing basis. The following sections provide details regarding the Group's and the Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. The fair value of the guarantees provided by the Company in connection with credit facilities, construction contracts and development agreements granted to its subsidiaries is not significant as it is not probable that the financial institutions and third parties will call upon the guarantees. The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk. Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group's and the Company’s exposure to credit risk arises primarily from trade and other receivables and contract assets. For cash and bank balances, the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. The Board of Directors approves and reviews policies and procedures for the management of these risks, which are executed by the management. The audit committee provides independent oversight to the effectiveness of the risk management process.