Fraser & Neave Holdings Bhd Annual Report 2020

214 FRASER & NEAVE HOLDINGS BHD 196101000155 (4205-V) Notes to The Financial Statements (Cont’d.) 30. FINANCIAL INSTRUMENTS (CONTINUED) (F) MARKET RISK Market risk is the risk that changes inmarket prices, such as foreign exchange rates, interest rates and other prices that will affect the Group’s financial position or cash flows. (i) Currency risk The Group is exposed to foreign currency risk on cash and cash equivalents, sales and purchases that are denominated in a currency other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily United States Dollar (“USD”) and Singapore Dollar (“SGD”). Risk management objectives, policies and processes for managing the risk The Group hedges a portion of its foreign currency denominated trade payables. The Group uses forward exchange contracts to hedge its foreign currency risk. Most of the forward exchange contracts have maturities of less than one year after the end of the reporting period. Where necessary, the forward exchange contracts are rolled over at maturity. Exposure to foreign currency risk The Group’s exposure to foreign currency (a currency which is other than the functional currency of the Group entities) risk, based on carrying amounts as at the end of the reporting period was: Denominated in Group USD RM’000 SGD RM’000 2020 Cash and cash equivalents 24,868 7,891 Receivables 53,295 4,574 Payables – (4,244) Net exposure 78,163 8,221 2019 Cash and cash equivalents 5,754 7,954 Receivables 74,844 21,751 Payables (1,709) (4,963) Net exposure 78,889 24,742 Currency risk sensitivity analysis Foreign currency risk arises fromGroup entities which have a RM functional currency. The exposure to currency risk of Group entities which do not have a RM functional currency is not material and hence, sensitivity analysis is not presented. A 10% (2019: 10%) strengthening of the following currencies against RM at the end of the reporting period would have increased or decreased, respectively pre-tax profit or loss by the amounts shown below. This analysis assumes that all other variables remained constant. Group 2020 RM’000 2019 RM’000 USD 7,816 7,889 SGD 822 2,474 A 10% (2019: 10%) weakening of the above currencies against RM at the end of the reporting period would have had equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant.