35. FINANCIAL INSTRUMENTS (continued) (iv) Credit risk (continued) Financial guarantees Risk management objectives, policies and processes for managing the risk The Company provided unsecured financial guarantees to banks in respect of banking facilities and cross currency swaps (“CCS”) arrangements granted to certain subsidiaries. The Company monitors on an ongoing basis the abilities of the borrowing entities to service their loans and CCS obligations on an individual basis. Exposure to credit risk, credit quality and collateral The maximum exposure of the Company in respect of financial guarantees at 31 December 2023 amounted to RM45,751,000 (2022: RM134,720,000) representing the outstanding bank loans and CCS obligations of its subsidiaries. At the end of the reporting period, the Company does not consider it probable that claims will be made against the Company under the financial guarantees. The financial guarantees are not recognised since the fair value on initial recognition was not material. Provision for loan taken by a joint venture Risk management objectives, policies and processes for managing the risk A wholly owned subsidiary, PHL is a joint sponsor under the Sponsor Support Agreement for the term loan facility granted to KHPL whereby the sponsors are required to provide for any shortfall payable by KHPL in respect of the term loan facility in the event of termination or non-completion of hospital project. Exposure to credit risk, credit quality and collateral The maximum exposure of the Group in respect of the loan at the reporting date amounted to RM38,757,000 (2022: RM47,688,000) representing the Group’s 50% share of bank loans drawn down and interest payable by KHPL (see note 23). On 5 January 2017, the bank served a notice to KHPL that the hospital project was unlikely to be completed. In view that KHPL is unlikely to be able to repay the loan, the Group made a provision for its 50% share of the amounts KHPL owed the bank. (v) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables and loans and borrowings. Maturity analysis The Group monitors its liquidity risk and maintains a level of cash and cash equivalents and bank facilities deemed adequate to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. The Group ensures that it has sufficient cash and available undrawn credit facilities to meet expected operational expenses, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. Annual Report 2023 211
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