notes to the financial statements - Investor Relations

CWT Limited
124
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2011
42 FINANCIAL RISK MANAGEMENT (CONT’D)
The Group has a credit policy in place whereby new customers are subject to credit evaluations based on available financial
information and past experiences. The Group has established credit limits for customers and monitors their balances on an
ongoing basis. Cash and fixed deposits are placed with banks and financial institutions, which are regulated.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statements of
financial position. Except as disclosed in note 33, there were no significant concentrations of credit risks.
Sales by the SCM segment are generally secured by letters of credit. The Group generally does not require collateral for sales
from other segments.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and availability of funding as
required. The Group monitors and maintains a level of cash and bank balances and credit facilities deemed adequate by
management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.
The Group aims at maintaining flexibility in funding by keeping adequate liquidity available. Where necessary and at
appropriate time, the Group would unlock cash from properties held to meet expansion needs.
The Group maintains adequate secured and unsecured loan facilities. As at 31 December 2011, the Group has unutilised
loan facilities amounting to $158,400,000 (2010: $66,500,000) that are available to fund its working capital requirements and
to service financing obligations.
Market risk
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and other price risks will
affect the Group’s profit. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return on risk.
Price risk
Price risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific
to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
Sensitivity analysis
Equity price risk
The Group’s equity securities are designated as available-for-sale investment. A 10% increase or decrease in the underlying
equity prices at the reporting date with all other variables held constant would increase or decrease equity by $8,353,000
(2010: $9,186,000 respectively).
Equity
10% 10%
increase decrease
Group $’000 $’000
2011
Quoted equity securities 8,353 (8,353)
2010
Quoted equity securities 9,186 (9,186)