Frontken Corporation Berhad 200401012517 (651020-T) • A N N U A L R E P O R T 2 0 2 1 145 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 27. FINANCIAL INSTRUMENTS (CONT’D) (a) Financial Risk Management Policies (Cont’d) Market Risk (Cont’d) (iii) Equity price risk The Group’s principal exposure to equity price risk arises mainly from changes in quoted investment prices. The Group manages its exposure to equity price risk by maintaining a portfolio of equities with different risk profiles. Equity Price Risk Sensitivity Analysis If prices for quoted investments at the end of the reporting period strengthened by 10% (2020: 10%) with all other variables being held constant, the Group’s and the Company’s profit after taxation or other comprehensive income would have increased by RM5,173,775 and RM4,864,396 (2020: RM833,253 and RM330,223) respectively. A 10% (2020: 10%) weakening in the quoted prices would have had an equal but opposite effect on the Group’s and the Company’s profit after taxation or other comprehensive income. Credit Risk The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from 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), 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. (i) Credit risk concentration profile The Group’s major concentration of credit risk relates to the amounts owing by 2 (2020: 2) customers which constituted approximately 30% (2020: 30%) of its total trade receivables as at the end of the reporting period. (ii) Exposure to credit risk At the end of the reporting period, the maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statement of financial position of the Group and of the Company after deducting any allowance for impairment losses (where applicable). In addition, the Company’s maximum exposure to credit risk also includes corporate guarantees provided to its subsidiaries as disclosed under the liquidity risk’s ‘Maturity Analysis’ of item (i) below, representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period. These corporate guarantees have not been recognised in the Company’s financial statements since their fair value on initial recognition were not material.
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