ANNUAL REPORT 2021 235 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS ʹˢ˥ ˧˛˘ Ѓˡ˔ˡ˖˜˔˟ ˬ˘˔˥ ˘ˡ˗˘˗ ʦʤ ʷ˘˖˘ˠ˕˘˥ ʥʣʥʤ (CONT’D) 48. FINANCIAL INSTRUMENTS (CONT’D) 48.1 FINANCIAL RISK MANAGEMENT POLICIES (cont’d) (a) Market Risk (cont’d) (i) Foreign Currency Risk (cont’d) Foreign Currency Risk Sensitivity Analysis Any reasonably possible change in the foreign currency exchange rates at the end of the reporting period against the respective functional currencies of the entities within the Group and the Company does not have a material impact on the profit after taxation and other comprehensive income of the Group and of the Company and hence, no sensitivity analysis is presented. (ii) Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from interest-bearing financial assets and liabilities. The Group’s policy is to obtain the most favourable interest rates available and by maintaining a balanced portfolio mix of fixed and floating rate borrowings. The Group’s fixed rate receivables, fixed deposits with licensed banks and fixed rate borrowings are carried at amortised cost. Therefore, they are not subject to interest rate risk as defined under MFRS 7 since neither the carrying amounts nor the future cash flows will fluctuate because of a change in market interest rates. The Group’s exposure to interest rate risk based on the carrying amounts of the financial instruments at the end of the reporting period is disclosed in Notes 27 and 34 to the financial statements. Interest Rate Risk Sensitivity Analysis Any reasonably possible change in the interest rates of floating rate term loans at the end of the reporting period does not have a material impact on the profit after taxation and other comprehensive income of the Group and of the Company and hence, no sensitivity analysis is presented. (iii) Equity Price Risk The Group does not have any quoted investment and hence, is not exposed to any equity price risk. (b) Credit Risk The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade, financing, and other receivables. The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other financial assets (including cash and bank balances and short-term cash investments), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries, and corporate guarantee given to financial institutions for credit facilities granted to certain subsidiaries. The Company monitors the results of these subsidiaries regularly and repayments made by the subsidiaries.
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