KUB Malaysia Berhad Annual Report 2021

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (b) Liquidity risk (cont’d) Company Weighted average On effective demand interest Carrying or within One to Over rate amount one year five years five years Total % RM’000 RM’000 RM’000 RM’000 RM’000 As at 31 December 2019 Financial liabilities: Trade and other payables - 9,326 9,326 - - 9,326 Amount due to subsidiaries - 715 715 - - 715 Borrowings 5.41 116 96 24 - 120 Total undiscounted financial liabilities 10,157 10,137 24 - 10,161 For the financial period ended 30 June 2021, the Company has assessed the existing financial guarantee in relation to guarantee provided by the Company to banks for banking facilities granted to subsidiaries amounting to RM16,427,000 (31.12.2019 RM78,769,000) and determined that the guarantees are more likely not to be called upon by the financiers. However, this estimate is subject to change depending on the probability of the financier claiming under the guarantee. The amounts for the financial guarantee are the maximum amount that the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the financiers. (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates. As the Group has no significant interest-bearing financial assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest-bearing financial assets are mainly short-term in nature and have been mostly placed in fixed deposits. The Group’s interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. The information on the weighted average effective interest rates (‘WAEIR’) as at the end of the reporting period and the maturities of the Group’s financial instruments that are exposed to interest rate risk is disclosed in Notes 27. Sensitivity analysis for interest rate risk At the end of the reporting period, if interest rates had been 25 basis points lower/higher, with all other variables held constant, the Group’s profit for the period/year would have been RM3,000 (31.12.2019: RM129,000) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment. 133 ANNUAL REPORT 2021 FINANCIAL STATEMENTS