38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued) (i) Foreign currency risk (continued) The sensitivity analysis includes outstanding balances denominated in foreign currencies. Group Company 2021 2020 2021 2020 RM’000 RM’000 RM’000 RM’000 Profit Loss Loss Loss after tax after tax after tax after tax USD/RM - strengthen by 10% (2020: 10%) 1,594 (1,040) - - - weaken by 10% (2020: 10%) (1,594) 1,040 - - HKD/RM - strengthen by 10% (2020: 10%) (729) 680 709 723 - weaken by 10% (2020: 10%) 729 (680) (709) (723) Sensitivity analysis of other currencies are not disclosed as the fluctuation of these foreign exchange rates against the Group’s functional currency would not be significant. (ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s and of the Company’s financial instruments will fluctuate because of changes in market interest rates. The Group’s and the Company’s deposits placed with financial institutions and borrowings are exposed to a risk of changes in their fair values due to changes in market interest rates. The Group’s and the Company’s borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short term receivables and payables are not exposed to interest rate risk. The Group and the Company borrow for operations at fixed and variable rates using hire purchase, term loans, trade financing facilities and bank overdraft. There is no formal hedging policy with respect to interest rate exposure. NOTES TO THE FINANCIAL STATEMENTS 183 P R G H O L D I N G S B E R H A D A N N U A L R E P O R T 2 0 2 1 31 December 2021 (cont’d)
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