MKH Berhad 75 Risk Management Framework (Cont’d) (b) COVID-19 Pandemic Risk (Cont’d) Various safety and health measures were implemented such as instituted new working arrangement for business continuity (i.e. work from home/work from office on rotational basis), implement protocols and adhere to government guidelines, constantly reminded all employees to wear a mask, practise safe social distancing at work and enhance biosecurity measures at our workplace. The Group will continue to monitor the situation closely and will do its best to protect its employees and stakeholders. (c) Financial Risks (i) Credit and liquidity risks arise from the inability to recover debts in a timely manner which may adversely affect the Group’s profitability, cash flow and funding. In order to minimise such exposures, tightening of credit control, close monitoring of collections and overdue debts were carried out. (ii) Interest rate risk arise mainly from the Group’s borrowings in the form of term loan, overdraft and revolving credit facilities to meet capital expenditures and working capital requirements. (iii) Commodity risk arises from the volatility of commodity prices such as crude palm oil (“CPO”) and palm kernel which are affected by factors such as weather, government policies, supply and demand, and competition from substitution products as well as currency fluctuation. (iv) Foreign exchange risk arises from movements in foreign currency exchange rates. The Group’s reporting currency is Malaysian Ringgit (“RM”). The majority of the Group’s plantation division borrowing is denominated in United States Dollar (“USD”), while the majority of the Group’s expenses is denominated in Indonesian Rupiah (“IDR”) and sale of CPO and palm kernel is denominated in IDR. A s the CPO is an internationally traded commodity mainly in USD, there is a natural hedge as the selling price of the CPO in IDR has a positive correlation with the strengthening of the USD currency. In addition, the Group constantly monitors and compare the selling price of CPO in the local Indonesian market (in Rupiah) and the Malaysia Derivation Exchange (in RM) and the foreign exchange rate to ensure that the Group is selling the CPO at the best possible price. The Board with the assistance of the Audit Committee, RMC and Internal Audit team have continuously review existing risks and identify new risks that the Group faces and management action plans to manage the risks. To further enhance the risk management process within the culture of the Group, review of existing risks and identification of new risks is also conducted annually with involvement of selected management staff. In additions, nominated key management personnel in each business unit have prepared action plans to address key risks and control issues highlighted by the Internal Audit team. During the financial year ended 30 September 2021, the RMC has: (a) reviewed management action plans presented by the nominated key management of certain business units of the Group; Statement on Risk Management and Internal Control
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