Annual Report 2023 191 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2023 (CONT’D) 47. FINANCIAL INSTRUMENTS (CONT’D) 47.1FINANCIAL RISK MANAGEMENT POLICIES (CONT’D) (a) Market Risk (Cont’d) (ii) Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from long-term borrowings with variable rates. The Group’s policy is to obtain the most favourable interest rates available and by maintaining a balanced portfolio of fixed and floating rate borrowings. The Group’s fixed rate deposits and borrowings are carried at amortised cost. Therefore, they are not subject to interest rate risk as defined in MFRS 7 since neither the carrying amounts nor the future cash flows will fluctuate because of a change in market interest rates. The Group’s exposure to interest rate risk based on the carrying amounts of the financial instruments at the end of the financial year is disclosed in Notes 24, 25 and 30 to the financial statements. Interest Rate Risk Sensitivity Analysis The following table details the sensitivity analysis to a reasonably possible change in the interest rates at the end of the financial year, with all other variables held constant:- Group Company 2023 2022 2023 2022 RM’000 RM’000 RM’000 RM’000 Effects on Profit After Taxation Increase of 100 basis points (bp) (441) (248) (15) (25) Decrease of 100 bp 441 248 15 25 (iii) Equity Price Risk The Group’s principal exposure to equity price risk arises mainly from changes in quoted investment prices. The Group manages its exposure to equity price risk by maintaining a portfolio of equities with different risk profiles. Equity Price Risk Sensitivity Analysis If prices for quoted investments at the end of the reporting period strengthen by 1% with all other variables being held constant, the Group’s and the Company’s profit after taxation and equity would have increased by approximately RM1,011,000 and RM366,000 (2022 - RM836,000 and RM573,000) respectively. A 1% weakening in the quoted prices would have had an equal but opposite effect on the profit after taxation and equity of the Group and Company.
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