MISC Annual Report 2019

37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (c) Liquidity risk Liquidity risk is the risk that the Group and the Corporation will encounter difficulty in meeting their financial obligations due to shortage of funds. The Group’s and the Corporation’s exposure to liquidity risk arise primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Corporation’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and various other sources of funding. The Group and the Corporation have at their disposal cash and short term deposits amounting to RM5,740,435,000 (2018: RM5,534,849,000) and RM2,817,049,000 (2018: RM1,957,819,000) respectively. As at 31 December 2019, the Group and the Corporation have unutilised credit lines of RM1.4 billion (2018: RM1.3 billion) and RM0.3 billion (2018: RM0.3 billion) respectively, which could be used for working capital purposes. 37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (b) Foreign currency risk (cont’d.) With all other variables held constant, the following table demonstrates the sensitivity of the Group’s and the Corporation’s profit before taxation to a reasonably possible change in the USD and RM exchange rates. 2019 2018 Effect on Effect on profit before profit before Change in taxation Change in taxation currency Increase/ currency Increase/ rate (Decrease) rate (Decrease) % RM’000 % RM’000 Group USD/RM +5% 3,370 +5% 15,469 -5% (3,370) -5% (15,469) Corporation USD/RM +5% 20,569 +5% 6,772 -5% (20,569) -5% (6,772) The net unhedged financial receivables and payables and cash and bank balances of the Group and of the Corporation that are not denominated in their functional currencies are as follows: Net financial receivables/(payables) and cash and bank balances held in non-functional currencies United Great Ringgit States Britain Singapore Functional currency Malaysia Dollar Pound Euro Dollar Total of Group entities RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 31 December 2019 Ringgit Malaysia – 86,006 – (333) (447) 85,226 United States Dollar (19,331) – 5,851 26,318 44,604 57,442 (19,331) 86,006 5,851 25,985 44,157 142,668 At 31 December 2018 Ringgit Malaysia – 207,381 102 – 22,721 230,204 United States Dollar 110,017 – 16,212 18,236 7,862 152,327 110,017 207,381 16,314 18,236 30,583 382,531 Functional currency of Corporation At 31 December 2019 United States Dollar (427,451) – 610 17,503 (250) (409,588) At 31 December 2018 United States Dollar (146,106) – 401 57,511 1,274 (86,920) NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 FINANCIAL STATEMENTS MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019 352 353