NOTES TO THE FINANCIAL STATEMENTS Cont’d 29. Financial instruments cont’d 29.6 Market risk cont’d 29.6.1 Currency risk cont’d Currency risk sensitivity analysis cont’d A 10% (2021: 10%) weakening of RM against the above currencies at the end of the reporting period would have had equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant. 29.6.2 Interest rate risk The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’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 Interest rate exposure arising from the Group’s borrowings is managed through the use of fixed and floating rate debts. The Group will consider entering into derivative financial instruments where necessary to achieve an appropriate mix of fixed and floating rate exposure within the Group’s policy. The Group and the Company are also exposed to the ongoing interbank offered rates (“IBOR”) reforms on its financial instruments that will be replaced or reformed as part of the market-wide initiatives. The Group’s and the Company’s IBOR exposures are indexed to USD LIBOR which will be discontinued on 30 June 2023. The alternative reference rate is Secured Overnight Financing Rate. The Group’s treasury team monitors and manages the transition to alternative rate with an aim to achieve economically equivalent transactions and minimal impact upon transition. As at 31 December 2022, transitional activity is currently ongoing, and the Group and the Company have no transaction for which the benchmark rate has been replaced with an alternative benchmark rate. As at 31 December 2022, the contract values of financial instruments indexed to USD LIBOR that have not been replaced with an alternative benchmark rate for the Group and the Company amounted to RM1,240,617,000 and RM979,412,000 respectively. PRESS METAL ALUMINIUM HOLDINGS BERHAD 295
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