38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT'D.) (c) Liquidity risk (cont'd.) Group Hedging activities The Group entered into IRS to hedge the cash flow risk of floating interest rate on the term loans. The notional amount swapped as at 31 December 2021 was RM11.5 billion (2020: RM10.2 billion). The swaps are settled quarterly, consistent with the interest payment schedule of the loan. The following table indicates the periods in which the cash flows are expected to occur for cash flow hedges as at 31 December 2021 and 31 December 2020: Carrying Contractual Within More than More than More than More than More than amount cash flows 1 year 1 - 2 years 2 - 3 years 3 - 4 years 4 - 5 years 5 years RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 At 31 December 2021 Net cash outflows (110,378) (1,000,060) (142,907) (132,398) (132,761) (132,316) (131,556) (328,122) At 31 December 2020 Net cash outflows (519,454) (1,159,498) (152,970) (144,986) (136,483) (136,857) (136,483) (451,719) The Group's hedging activities on the IRS are tested to be effective. During the year, the Group recognised in other comprehensive income a gain of RM423,354,000 (2020: loss of RM378,011,000) on the IRS of its subsidiaries due to higher market expectation of floating rates in comparison to the previous year's market expectations. The Group's share of its joint ventures' in other comprehensive income a gain on unrealised gain on IRS during the year was RM14,169,000 (2020: loss of RM58,682,000) due to higher market expectation of floating rates in comparison to the previous year's market expectations. (d) 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 exposure to credit risk arises primarily from its operating activities (mainly trade receivables and finance lease receivables) and from its investing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. At the reporting date, the Group’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets mentioned in Notes 20(a), 20(d), 22 and 24, and is recognised in the statements of financial position. 38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT'D.) (d) Credit risk (cont'd.) Receivables, finance lease receivables and contract assets The Group and the Corporation determine concentrations of credit risk by monitoring the industry sector profile of their receivables on an ongoing basis. The credit risk concentration profile of the Group’s and the Corporation’s trade receivables including long term receivables, finance lease receivables and contract assets due from third parties at the reporting date are as follows: Group Corporation 2021 2020 2021 2020 RM’000 RM’000 RM’000 RM’000 Gas Assets & Solutions 8,035,398 5,729,298 143,644 154,847 Petroleum and Product Shipping 299,153 254,949 – – Offshore Business 13,744,420 10,973,989 954,954 1,008,343 Marine and Heavy Engineering 721,037 355,100 – – Others 7,947 8,868 – – 22,807,955 17,322,204 1,098,598 1,163,190 At reporting date, approximately 3.1% (2020: 8.7%) and 84.6% (2020: 72.2%) of the Group’s and the Corporation’s trade receivables including long term receivables, finance lease receivables and contract assets were due from related parties. The Group and the Corporation perform credit rating assessment of all its counterparties in order to measure ECLs of trade receivables for all segments using the PETRONAS Credit Risk Rating System. This credit rating assessment considers quantitative assessment using the counterparties’ financial statements or a qualitative assessment of the counterparties, which includes but is not limited to their reputation, competitive position, industry and geopolitical outlook. In determining the ECL, the probability of default assigned to each counterparty is based on their individual credit rating. This probability of default is derived by benchmarking against available third party and market information, which also incorporates forward looking information. NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 MISC Berhad 424 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 425 FINANCIAL STATEMENTS FINANCIAL STATEMENTS
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