MSM Malaysia Holdings Berhad Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 4 FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial risk management policies (continued) Market risk (continued) (iii) Finance rate risk (continued) The finance rate profile of the Group’s finance bearing financial liabilities, based on carrying amounts as at the end of the reporting period was: Group Company 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 Financial liabilities At fixed rate: Loan due to a related company 70,431 30,365 37,116 - Borrowings 341,156 421,207 - - 411,587 451,572 37,116 - At floating rate (exposed to cash flow finance rate risk): Borrowings 703,628 875,538 703,628 875,538 Loan due to a subsidiary - - 94,758 72,394 703,628 875,538 798,386 947,932 1,115,215 1,327,110 835,502 947,932 If finance rates on its floating rate financial liabilities increased/decreased by 10 basis points with all other variables held constant, the loss after tax of the Group will decrease/increase by RM535,000 (2018: profit after tax of the Group will decrease/increase by RM665,000). If finance rates on its floating rate financial liabilities increased/decreased by 10 basis points with all other variables held constant, the loss after tax of the Company will decrease/increase by RM607,000 (2018: loss after tax of the Company will decrease/increase by RM720,000). Other financial assets and financial liabilities are non-finance bearing, and therefore are not affected by changes in finance rates. Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents, contractual cash flows of debt investments carried at amortised cost and at fair value through profit or loss (FVPL), favourable derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures from outstanding receivables. The Group adopts the policy of dealing with customers with an appropriate credit history, and obtaining sufficient security where appropriate, including payments in advance, security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement. Receivables, amounts due from subsidiaries and other related companies’ exposure are closely monitored and continuously followed up. 149 FINANCIAL STATEMENTS 08