Tropicana Corporation Berhad Annual Report 2019

39. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 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. The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Managing Director, Group Finance. The Risk Management Committee provides independent oversight to the effectiveness of the risk management process. 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. (a) Credit 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. Credit risks with respect to trade receivables are limited as the legal title to the properties sold remain with the Group until the purchase consideration is fully paid. As for other receivables, the credit risk is minimised via dealing with counterparties with appropriate credit, payment histories and other relevant information. For cash and bank balances, the Group and the Company minimise credit risk by dealing exclusively with reputable financial institutions. The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. Exposure to credit risk At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statements of financial position. If necessary, the Group may obtain collaterals from counter-parties as a means of mitigating losses in the event of default. Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the industry sector profile of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the reporting date are as follows: 2019 2018 RM’000 % of total RM’000 % of total Group Property development and property management 210,651 88% 250,975 75% Property investment, recreation and resort 9,611 4% 37,938 11% Investment holding and others 18,720 8% 48,107 14% 238,982 100% 337,020 100% pg 239 Tropicana Corporation Berhad Annual Report 2019 Sustainability at Tropicana What We’ve Governed Financial Statements & Other Information