199 ANNUAL REPORT 2024 MST GOLF GROUP BERHAD 33. FINANCIAL INSTRUMENTS (CONT’D) 33.2 Financial risk management objectives and policies Financial risk The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. Financial risk management policy is established to ensure that adequate resources are available for the development of the Group’s and the Company’s business whilst managing its credit risk, liquidity risk, interest rate risk and foreign currency risk. The Group and the Company operate within clearly defined policies and procedures that are approved by the Board of Directors to ensure the effectiveness of the risk management process. The main areas of financial risks faced by the Group and the policy in respect of the major areas of treasury activities are set out as follows:- (a) Credit risk Credit risk is the risk of a financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It is the Group’s and the Company’s policy to enter into financial instrument with a diversity of creditworthy counterparties. The Group and the Company do not expect to incur material credit losses of its financial assets or other financial instruments. Concentration of credit risk exists when changes in economic, industry and geographical factors similarly affect the Company of counterparties whose aggregate credit exposure is significant in relation to the Group’s and the Company’s total credit exposure. It is the Group’s and the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. The Group and the Company do not offer credit terms without the approval of the management. Following are the areas where the Group and the Company are exposed to credit risk:- Trade receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate. The Directors have established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external rating, if they are available, financial statements, credit agency information, industry information and in some cases bank references. Sale limits are established for each customer and reviewed periodically. Any sales exceeding those limits require approval from the Directors.
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