DESTINI AR 2017

41. Financial Instruments (Cont’d) (b) Financial risk management objectives and policies The Group’s financial risk management policy is to ensure that adequate financial resources are available for the development of the Group operations whilst managing its financial risks, including credit, liquidity, foreign currency, interest rate and market price risks. The Group operates within clearly defined guidelines that are approved by the Board and the Group’s policy is not to engage in speculative transactions. The following sections provide details regarding the Group’s exposure to the abovementioned financial risks and the objectives, policies and processes for the management of these risks. (i) Credit risk Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from its receivables from customers and deposits with banks and financial institutions. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries and financial guarantees given to banks for credit facilities granted to subsidiaries. The Group has adopted a policy of only dealing with creditworthy counterparties. Management has a credit policy in place to control credit risk by dealing with creditworthy counterparties and deposit with banks and financial institutions with good credit rating. The exposure to credit risk is monitored on an ongoing basis and action will be taken for long outstanding debts. The carrying amounts of the financial assets recorded on the statements of financial position at the end of the financial year represent the Group’s and the Company’s maximum exposure to credit risk except for financial guarantees provided to banks for banking facilities granted to certain subsidiaries. The Company’s maximum exposure in this respect is RM107,040,905 (2016: RM15,875,529), representing the outstanding banking facilities of the subsidiaries as at the end of the reporting period. There was no indication that any subsidiary would default on repayment as at the end of the reporting period. Save as disclosed in Note 39(c), the Group has no significant concentration of credit risk as its exposure spread over a large number of customers. Financial guarantee The Group provides secured bankers’ guarantee in favour of the local authorities for purpose of securing development projects. The maximum exposure of credit risk amounted to RM59,548,762 (2016: RM37,677,282). There was no indication that the guarantee will be called upon. Intercompany loan advances The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of the subsidiaries regularly. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statements of financial position. As at the end of the reporting period, there was no indication that the loans and advances to the subsidiaries are not recoverable. The Company does not specifically monitor the ageing of current advances to the subsidiaries. 165 DESTINI BERHAD Annual Report 2017