Yinson Annual Report 2018

42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company. At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amounts of each class of financial assets recognised in the statement of financial position, including derivative financial instruments with positive fair value. (i) Receivables Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on the individual credit standings and financial strengths. Outstanding receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major receivables. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of the receivables disclosed in statement of financial position. The Group does not hold collateral as security. As at 31 January 2018, the credit risk of the Group primarily relates to the Group’s 3 (2017: 3) largest customers which accounted for 92% (2017: 90%) of the outstanding trade receivables at the end of the reporting period. The Group believes these counterparties’ credit risk is low taking into consideration of their financial position, past collection experiences and other factors. Except for the allowance for doubtful debts provided as disclosed in Note 24(a) to the financial statements, management does not expect any counterparty to fail to meet their obligations. (ii) Cash deposits Credit risk from balances with banks and financial institutions is managed by the Group’s finance department in accordance with the Group’s policy. Counterparty credit standings are reviewed by the Company’s Board of Directors on an annual basis, and may be updated throughout the financial year. Limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure to make payments. The maximum exposure to credit risk at the reporting date is represented by their carrying value in statement of financial position. (c) Liquidity risk Liquidity risk is the risk that the Group and 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 are to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and perpetual securities. Corporate Overview Stewardship Governance Accountability 179 Yinson Holdings Berhad Annual Report 2018