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INTRODUCTION ABOUT US MANAGEMENT APPROACH
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2022
4.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s and the Company’s principal financial liabilities comprise bank loans and overdrafts, finance leases, loan from shareholders and trade and payables. The main purpose of these financial liabilities is to finance the Group’s and the Company’s operations. The Group’s and the Company’s principal financial assets included other current financial asset, trade and other receivables, and cash at bank and on hand that arise directly from its operations. The Group and the Company also hold equity investments classified at Fair value through profit or loss and Fair value through other comprehensive income.
The Group and the Company are exposed to market risk, credit risk and liquidity risk. The Group’s and the Company’s senior management oversees the management of these risks. Senior management ensures that the Group’s and the Company’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk objectives.
A description of the various risks to which the Group and the Company are exposed are shown below as well as the approach taken by management to control and mitigate those risks.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk to which the Group and the Company are exposed comprise three types of risk: interest rate risk, foreign currency risk, and equity price risk. Financial instruments affected by market risk include loans and borrowings, non-current financial assets, and trade and other payables.
The sensitivity analysis in the following sections relate to the position as at June 30, 2022 and 2021.
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 and the Company’s exposure to the risk of changes in market interest rates relates primarily to the Group’s and the Company’s debt obligations with floating interest rates.
The Group’s and the Company’s income and operating cash flows are subject to the risks of changes in market interest rates.
The Group’s and the Company’s policy is to manage its interest risk using a mix of fixed and variable rate debts.
Interest rate sensitivity
The following table demonstrates through the impact on floating rate borrowings the sensitivity of the Group’s and the Company’s profit before tax and equity to a reasonable possible change in interest rates with all other variables held constant.
(a)
(i)
Increase / (decrease) in basis point
+50 -25
Rs’000 4,422 (2,211)
2021 Rs’000 3,984 (1,992)
THE GROUP
2022
THE COMPANY
162
UBP INTEGRATED REPORT 2022
Rs’000
7,697
(3,848)
2021
2022
Rs’000
7,220
(3,610)