CFSL Integrated Report 2021

60 C I M F I N A N C I A L S E R V I C E S L T D PRINCIPAL RISK DESCRIPTION RISK RESPONSE INTEREST RATE RISK Movement during the year: Cim Finance manages its interest rate risk by aiming to maximise the risk-adjusted net interest income within the tolerable level. The interest rate risk is closely monitored by the Treasury department and the impact on earnings is assessed in the event of changes in rates or the squeezing of the net interest margin due to a rise in cost of funds or lower interest rates on credit facilities. The impact on earnings is regularly reviewed at the level of the Asset and Liability Committee (ALCO). FUNDING & LIQUIDITY RISK Movement during the year: CimFinance has a comfortable liquidity position. We have successfully raised funds through the debt capital market as a means to diversify our borrowing base and contingency funding is also available. The liquidity and funding risk is managed as follows: Shorter terms – Tactical: Manage intraday liquidity positions and monitor daily cash flow requirements. Longer terms – Structural: Ensure a structurally sound financial position, preserve a diversified funding base and manage long-term cash flows. Contingency liquidity: Monitor and manage early warning liquidity indicators, establish and maintain liquidity contingency plans, carry out regular stress testing and set liquidity buffers. BUSINESS RISK Movement during the year: We face the risk of lower demand in this difficult and extremely competitive economic environment. We continue to track changes in the external environment and carry out market research to stay abreast of the latest developments. New strategies and products are developed accordingly. For instance, we launched a WhatsApp for Business platform, where existing clients can interact with Cim Finance representatives via WhatsApp to apply for loan facilities rather than physically visit Cim counters to submit their applications. This also contributes to limiting any risk of contamination. In addition, we have reviewed our credit approval process to online merchants without compromising existing controls. Risk Management Report (continued) R I S K M A N A G E M E N T

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