Excel Force MSC Berhad Annual Report 2016

EXCEL FORCE MSC BERHAD ANNUAL REPORT 2016 104 Notes to the Financial Statements 31 December 2016 (cont’d) 32. 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 amounts owing by subsidiaries. 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 2016, other than the amounts owing by five (5) major receivables of the Group and of the Company constituting 47% (2015: 55%) and 30% (2015: 44%) respectively of the total receivables of the Group and the amounts owing by subsidiaries constituting 33% (2015: 24%) 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 12 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 12 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. The Group is actively managing its operating cash flows to ensure that all commitments and funding needs are met. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed credit lines available.