Tropicana Corporation Berhad Annual Report 2020

40. 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. 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: 2020 2019 RM'000 % of total RM'000 % of total Group Property development and property management 240,904 88% 210,651 88% Property investment, recreation and resort 23,650 8% 9,611 4% Investment holding and others 9,669 4% 18,720 8% 274,223 100% 238,982 100% 40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT'D.) (b) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group's and the Company's exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group's and the Company's objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. The Group's and the Company's liquidity risk management policy is to maintain sufficient liquid financial assets and stand-by credit facilities with several banks so as to ensure that all operating, investing and financing needs are met. Analysis of financial instruments by remaining contractual maturities The table below summarises the maturity profile of the Group’s and the Company’s liabilities at the reporting date based on contractual undiscounted repayment obligations. On demand or within One to More than one year five years five years Total RM'000 RM'000 RM'000 RM'000 Group Financial liabilities 2020 Trade and other payables 1,136,994 288,412 276,046 1,701,452 Lease liabilities 2,936 4,871 2,477 10,284 ICPS 21,767 107,080 138,517 267,364 Borrowings 686,315 2,826,054 741,357 4,253,726 Total undiscounted financial liabilities 1,848,012 3,226,417 1,158,397 6,232,826 2019 Trade and other payables 1,791,133 254,105 216,479 2,261,717 Lease liabilities 3,484 1,925 2,876 8,285 ICPS 11,789 123,780 141,464 277,033 Borrowings 1,078,314 1,308,442 568,826 2,955,582 Total undiscounted financial liabilities 2,884,720 1,688,252 929,645 5,502,617 Company Financial liabilities 2020 Trade and other payables 387,667 – – 387,667 Lease liabilities 648 349 – 997 ICPS 21,767 107,080 138,517 267,364 Borrowings 227,827 1,515,521 214,308 1,957,656 Total undiscounted financial liabilities 637,909 1,622,950 352,825 2,613,684 2019 Trade and other payables 299,856 – – 299,856 Lease liabilities 957 306 – 1,263 ICPS 11,789 123,780 141,464 277,033 Borrowings 218,043 140,893 – 358,936 Total undiscounted financial liabilities 530,645 264,979 141,464 937,088 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2020 ANNUAL REPORT 2020 TROPICANA CORPORATION BERHAD FINANCIAL STATEMENTS AND OTHER INFORMATION 282 283