NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
(cont’d)
E X C E L F O R C E M S C B E R H A D • A N N U A L R E P O R T 2 0 1 4
100
33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s financial risk management objective is to optimise value creation for shareholders whilst
minimising the potential adverse impact arising from fluctuations in foreign currency exchange and interest
rates and the unpredictability of the financial markets.
The Group operates within an established risk management framework and clearly defined guidelines that
are regularly reviewed by the Board of Directors and does not trade in derivative financial instruments.
Financial risk management is carried out through risk review programmes, internal control systems, and
adherence to the Group financial risk management policies. The Group is exposed mainly to credit risk,
liquidity and cash flow risk, interest rate risk and foreign currency risk. Information on the management of
the related exposures is detailed below.
(i) Credit risk
Cash deposits and trade receivables could give rise to credit risk which requires the loss to be
recognised if a counter party fails to perform as contracted. The counter parties are major financial
institutions and reputable stockbroking companies. It is the Group’s policy to monitor the financial
standing of counter parties on an ongoing basis to ensure that the Group is exposed to minimal credit
risk.
The Group’s primary exposure to credit risk arises through its trade receivables while the Company’s
primary exposure is through the amount owing by a subsidiary. The Group’s trading terms with its
customers are mainly on credit. The credit period is generally for a period of two (2) months,
extending up to three (3) months for major customers. The Group seeks to maintain strict control over
its outstanding receivables via a credit control department to minimise credit risk. Overdue balances
are reviewed regularly by senior management.
Exposure to credit risk
At the end of the reporting period, the Group’s and the Company’s maximum exposure to credit risk
is represented by the carrying amount of each class of financial assets recognised in the statements
of financial position.
Credit risk concentration profile
As at 31 December 2014, other than the amounts owing by five (5) major receivables of the Group
and of the Company constituting 59% (2013: 35%) and 46% (2013: 25%) respectively of the total
receivables of the Group and the amount owing by subsidiary constituting 23% (2013: 32%) of the
total receivables of the Company, there was no significant concentrations of credit risk.
Financial assets that are neither past due nor impaired
Information regarding trade and other receivables that are neither past due nor impaired is disclosed
in Note 13 to the financial statements. Deposits with banks and other financial institutions that are
neither past due nor impaired are placed with or entered into with reputable financial institutions or
companies with high credit ratings and no history of default.
Financial assets that are either past due or impaired
Information regarding financial assets that are either past due or impaired is disclosed in Note 13 to
the financial statements.
(ii) Liquidity and cash flow risk
The Group actively manages its debt maturity profile, operating cash flows and the availability of
funding so as to ensure that all operating, investing and financing needs are met. In liquidity risk
management strategy, the Group measures and forecasts its cash commitments and maintains a
level of cash and cash equivalents deemed adequate to finance the Group’s activities.
