Kimlun Corporation Berhad Annual Report 2020

200901023978 (867077-X) 34. Financial risk management objectives and policies (cont'd) (c) Interest rate risk Sensitivity analysis for interest rate risk (d) Foreign currency risk Sensitivity analysis for foreign currency risk 2020 2019 RM RM Increase/(decrease) in profit after tax SGD/RM - strengthened 3% 873,000 820,000 - weakened 3% (873,000) (820,000) USD/RM - strengthened 3% (26,000) (13,000) - weakened 3% 26,000 13,000 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 primary interest rate risk relates to interest-bearing borrowings. The investments in financial assets including fixed deposits are mainly short term in nature and they are not held for speculative purposes. The Group manages its interest rate exposure by using a mix of fixed and floating rate debts and actively reviewing its debt portfolio, taking into account the investment holding period and nature of its assets. During the financial year, if interest rates had been 50 basis points lower/higher, with all other variables held constant, the Group's net profit after tax would have increased/decreased by RM1,550,000 (2020: RM1,545,000) during the year. The assumed movement in basis points for interest rate sensitivity analysis was based on the prior year observable market environment. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than RM, the functional currency of the Group's entities. The foreign currency in which these transactions are denominated is Singapore Dollar (“SGD”) and United States Dollar ("USD"). The Group did not enter into any forward currency contracts during the financial years ended 31 December 2020 and 2019. The following table demonstrates the sensitivity of the Group’s profit net of tax to a reasonably possible change in the SGD and USD exchange rates against RM, with all other variables held constant. - 100 - 157 Kimlun Corporation Berhad Registration No. 200901023978 (867077-X) NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020