PRG Holdings Berhad Annual Report 2017

• Annual Report 2017 149 33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s financial risk management objectives are 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 is exposed mainly to foreign currency risk, interest rate risk, liquidity risk, cash flow risks and credit risk. Information on the management of the related exposures is detailed below: (i) 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 is exposed to foreign exchange rate risk on sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily United States Dollar (“USD”), Hong Kong Dollar (“HKD”), Vietnamese Dong, Euro, Pound Sterling, Australian Dollar and Chinese Renminbi. The Group and the Company also hold cash and bank balances denominated in foreign currencies for working capital purposes. Information regarding the currency exposure profile of cash and bank balances is disclosed in Note 17 to the financial statements. The Group does not hedge these exposures by purchasing or selling forward currency contracts at present. However, the management keeps this policy under review. In respect of its overseas subsidiaries, the Group maintains a natural hedge, where possible, by borrowing in the currency of the country in which the subsidiary is located or by borrowing in currencies that match the future revenue stream to be generated from its subsidiaries. Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Group’s and of the Company’s profit after tax to a reasonably possible change in the USD and HKD exchange rates against the Ringgit Malaysia (“RM”) respectively, with all other variables held constant. 10% is the sensitivity rate used when reporting foreign currency risk exposures internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes outstanding balances denominated in foreign currencies. Group Company 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000 Profit Profit Profit Profit after tax after tax after tax after tax USD/RM - strengthen by 10% (2016: 10%) 1,427 1,184 - 335 - weaken by 10% (2016: 10%) (1,427) (1,184) - (335) HKD/RM - strengthen by 10% (2016: 10%) - (59) - (59) - weaken by 10% (2016: 10%) - 59 - 59 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S 3 1 D E C E M B E R 2 0 1 7 ( C O N T ’ D )