Sasbadi Annual Report 2017

NOTES TO THE FINANCIAL STATEMENTS 128 SASBADI HOLDINGS BERHAD (1022660-T) I BER AD (10 2 60-T) 23. Financial instruments (continued) 23.6 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices that will affect the Group’s financi al position or cash flows. 23.6.1 Currency risk The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than the respective functional currencies of Group entities. The currency giving rise to this risk is primarily U.S. Dollar (“USD”) . Risk management objectives, policies and processes for managing the risk The Group’s exposure to foreign currency risk is monitored on an ongoing basis and forward exchange contracts are used to hedge foreign currency risk when necessary. Forward exchange contracts, if any, would have maturities of less than one year. Where necessary, the forward exchange contracts are rolled over at maturity. Exposure to foreign currency risk The Group’s exposure to foreign currency (a curren cy which is other than the functional currency of the Group entities) risk, based on carrying amounts as at the end of the reporting period was: Group Denominated in USD 2017 2016 RM’000 RM’000 Trade payables 123 - Foreign currency risk arises from the aforementioned exposures is not material, hence, sensitivity analysis is not presented. 23.6.2 Interest rate risk The Group’s fixed rate borrowings are exposed to a risk of change in their fair values due to changes in interest rates. The Gr oup’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Investments in equity securities and short term receivables and payables are not significantly exposed to interest rate risk. Risk management objectives, policies and processes for managing the risk The Group adopts a practice to continuously seek for alternative banking facilities which provide competitive interest rates to finance and/or refinance its working capital requirements.