34. FINANCIAL INSTRUMENTS (CONTINUED) 34.4 Credit risk (continued) Financial guarantee contracts The Company provides unsecured financial guarantee contracts to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors the ability of the subsidiaries to service their loans on an individual basis. The Company assumes that there is a significant increase in credit risk when a subsidiary’s financial position deteriorates significantly. The Company considers a financial guarantee contract to be credit impaired when: – The subsidiary is unlikely to repay its credit obligation to the bank in full; or – The subsidiary is continuously loss making and is having a deficit shareholders’ fund. The Company determines the probability of default of the guaranteed loans individually using internal information available. All of the financial guarantee contracts are considered to be performing, have low risks of default and historically there were no instances where these financial guarantee contracts were called upon by the parties of which the financial guarantee contracts were issued to. Accordingly, no loss allowances were identified based on 12–month expected credit losses. 34.5 Liquidity risk Liquidity risk is the risk that the Group and the Company will not be able to meet their financial obligations as they fall due. The Group’s and the Company’s exposure to liquidity risk arises principally from its various payables, loans and borrowings. The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. Financial Statements DAGANG NeXCHANGE BERHAD 288 NOTES TO THE FINANCIAL STATEMENTS
RkJQdWJsaXNoZXIy NDgzMzc=