Serba Dinamik Annual Report 2021

Registration No: 201501042584 (1167905-P) Serba Dinamik Holdings Berhad (Incorporated in Malaysia) 119 32. Financial risk management policies The main areas of financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activity are set out as follows: (a) 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 and the Company are exposed to credit risk primarily from their trade receivables. The Group’s or the Company’s exposure to credit risk arises principally from loans and advances to subsidiaries and financial guarantees given to banks for credit facilities granted to subsidiaries. There are no significant changes as compared to prior year. Trade receivables Risk management objectives, policies and processes for managing the risk The customers of the Group are principally involved in the oil and gas industry. The Group uses ageing analysis to monitor the credit quality of the receivables. At each reporting date, the Group assesses whether any of the trade receivables are credit impaired. The gross carrying amounts of credit impaired trade receivables and contract assets are written off (either partially or full) when there is no realistic prospect of recovery. This is generally the case when the Group or the Company determines that the debtor does no have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. Nevertheless, trade receivables that are written off could still be subject to enforcement activities. There are no significant changes as compared to previous year. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statement of financial position. Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable values. A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than 120 days, which are deemed to have higher credit risk, are monitored individually.