(Excerpt from the audit report)
The Company’s activities expose it to a variety of financial risk, including the effects of changes in the debt market prices, and interest rates. Management seeks to minimize potential adverse effects on the financial performance of the Company by applying procedures to identify, evaluate and manage these risks, based on guidelines set by the Board of Directors.
The Company has exposure to following risk from its use of financial instruments:
- Credit Risk
- Liquidity Risk
This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these financial statements. The main purpose of the Company’s dealings in financial instruments is to fund its operations and capital expenditures.
The Board of Directors (BOD) has overall responsibility for the establishment and oversight of the Company’s risk management framework.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.
All risks faced by the Company are incorporated in the annual operating budget.
Mitigating strategies and procedures are also devised to address the risks that inevitably occur so as not to affect the Company’s operations and detriment forecasted results. The Company through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
(a) Credit Risk: Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.
(b) Liquidity Risk: The Company closely monitors its cash flows and ensures that credit facilities are available to meet its obligations as and when the fall due. Furthermore, the Company places money in excess of immediate requirements in banks.
The Company’s objectives when managing capital is to maintain a capital structure that provides a balance between the risk associated with higher level of borrowings and the advantages and security of a sound capital position.
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