ACCOUNTABILITY 264 YINSON HOLDINGS BERHAD 44. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (a) Market risk (continued) (ii) Foreign currency risk (continued) Sensitivity The following tables demonstrate the sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant. The effect on the Group’s profit arising from the net financial liability/asset that are exposed to currency risk will be as follows: Change in USD against RM Effect on profit Group RM million Company RM million 2026 +7% 21 (7) -7% (21) 7 2025 +7% 19 (24) -7% (19) 24 (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group and the Company. At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amounts of each class of financial assets recognised in the statement of financial position. Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on the individual credit standings and financial strengths. Outstanding receivables are regularly monitored. Credit risk from balances with banks and financial institutions is managed by the Group’s Treasury department in accordance with the Group’s policy. Counterparty credit standings are reviewed by the Company’s Senior Management on an annual basis, and may be updated throughout the financial year. Limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure to make payments. (i) Trade receivables and contract assets ECL for trade receivables and contract assets are measured using the simplified approach. The expected loss rates are based on the payment profiles of sales over a period of 36 months before reporting date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group and the Company have identified the gross domestic product (“GDP”), GDP growth, oil price and country rating in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. No significant changes to estimation techniques or assumptions were made during the reporting period. The reconciliation of allowance for impairment and maximum exposure to credit risk are disclosed in Note 25(a) and Note 6(b)(i).
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