NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 23. Financial risk management objectives and policies (cont’d) (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group’s and of the Fund’s financial instruments will fluctuate because of changes in the market interest rates. The Group and the Fund manage their financing rate exposure by maintaining a prudent mix of fixed and floating rate of borrowings. The Group and the Fund place cash deposits on short-term basis and therefore this allows the Group and the Fund to respond to significant changes of financing rate promptly. The interest rate mentioned below will have an impact on the management of the Group and the Fund regardless of whether it is an Islamic fund or otherwise. It does not in any way suggest that the Group and the Fund will invest in conventional financial instruments. All the investments and placements carried out for the Group and the Fund are in accordance with Shariah requirements. Sensitivity analysis for profit rate risk At the end of the reporting period, a change of 25 basis points (“bp”) in financing rates would have increased/(decreased) post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. Group Fund 2021 2020 2021 2020 RM RM RM RM Financing rate - 25 bp increase 1,608,433 1,618,278 1,608,529 1,619,462 - 25 bp decrease (1,608,433) (1,618,278) (1,608,529) (1,619,462) (d) 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 has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. It is not the Group’s policy to hedge foreign currency translation risk. The Group and the Fund alsomaintain bank accounts denominated in foreign currencies, primarily in AUD, as a natural hedge against foreign currency risk. GOVERNANCE STRUCTURE FINANCIAL REPORTS 193 AN PO STRATEGIC PERFORMANCE CORPORATE OVERVIEW THE DRIVING FORCES SUSTAINABILITY STATEMENT
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