39. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.) (c) Interest rate risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s primary interest rate risk relates to interest-bearing borrowings. The investments in financial assets including fixed deposits are mainly short-term in nature and they are not held for speculative purposes. The Group manages its interest rate exposure by using a mix of fixed and floating rate debts and actively reviewing its debt portfolio, taking into account the investment holding period and nature of its assets. Interest rate sensitivity The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s and of the Company’s loss before tax (through the impact on floating rate borrowings). 2022 2021 RM’000 RM’000 Group Borrowings denominated in Ringgit Malaysia Interest rates increase by 25 basis point Loss before tax will be higher by 9,500 9,868 Interest rates decrease by 25 basis point Loss before tax will be lower by (9,500) (9,868) Company Borrowings denominated in Ringgit Malaysia Interest rates increase by 25 basis point Loss before tax will be higher by 4,388 4,558 Interest rates decrease by 25 basis point Loss before tax will be lower by (4,388) (4,558) (d) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures arising from balances in other payables in a currency other than the functional currencies of the Group. The foreign currencies in which these transactions are denominated in are US Dollar, Singapore Dollar and Renminbi. The Group’s foreign currency risk management objective is to minimise foreign currency exposure that gives rise to economic impact, both at transaction and reporting period translation levels. The Group and the Company are not exposed to significant foreign currency risk as the majority of the Group’s and of the Company’s transactions, assets and liabilities are denominated in the functional currencies of the respective entities within the Group. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2022 276 ANNUAL REPORT 2022
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