Fraser & Neave Holdings Bhd Annual Report 2020

212 FRASER & NEAVE HOLDINGS BHD 196101000155 (4205-V) Notes to The Financial Statements (Cont’d.) 30. FINANCIAL INSTRUMENTS (CONTINUED) (D) CREDIT RISK (CONTINUED) Cash and cash equivalents The cash and cash equivalents are held with banks and financial institutions. As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position. These banks and financial institutions have low credit risks. In addition, some of the bank balances are insured by government agencies. Consequently, the Group and the Company are of the view that the loss allowance is not material and hence, it is not provided for. Financial guarantees Risk management objectives, policies and processes for managing the risk The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to a subsidiary. The Company monitors the ability of the subsidiary to service its loans on an individual basis. Exposure to credit risk, credit quality and collateral The maximum exposure to credit risk amounts to RM93,944,000 (2019: RM128,317,000) representing the outstanding banking facilities of the subsidiary as at end of the reporting period. The financial guarantees are provided as credit enhancements to the subsidiary’s secured loans. Recognition and measurement of impairment loss As at the end of the reporting period, there was no indication that any subsidiary would default on repayment. Inter-company loans and advances Risk management objectives, policies and processes for managing the risk The Company provides unsecured loans and advances to subsidiaries. The Company monitors the ability of the subsidiaries to repay the loans and advances on an individual basis. Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position. Loans and advances provided are not secured by any collateral or supported by any other credit enhancements. Recognition and measurement of impairment loss As at the end of the reporting period, there was no indication that the loans and advances to the subsidiaries are not recoverable. (E) LIQUIDITY RISK Liquidity risk is the risk that the Group or the Company will not be able to meet its financial obligations as they fall due. The Group’s and the Company’s exposure to liquidity risk arises principally from its various payables, loans and borrowings. The Group and the Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.