| CIM FINANCE. INTEGRATED REPORT 2022 132 EXPLANATORY NOTES 30 SEPTEMBER 2022 3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) (k) Uncertainty over income tax treatments The Group and the Company are subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group and the Company recognise tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognised when, despite the Group’s and the Company’s belief that their tax return positions are supportable, the Group and the Company believe it is more likely than not that a taxation authority would not accept its filing position. In these cases, the Group and the Company record their tax balances based on either the most likely amount or the expected value, which weights multiple potential scenarios. The Group and the Company believe that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. No material uncertain tax positions exist as at 30 September 2022. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period inwhich such determination is made. 4. FINANCIAL RISK MANAGEMENT Whilst risk is inherent in normal activities, it ismanaged through an integrated riskmanagement framework, including ongoing identification, measurement andmonitoring, subject to risk limits and other controls. This process of riskmanagement is critical to the Group’s continuing profitability and each individual within the Group is accountable for the risk exposures relating to his or her responsibilities. The Group is exposed to credit risk, liquidity risk and market risk, the latter being subdivided into trading and non–trading risks. It is also subject to country risk and various operating and business risks. TheGroup’s riskmanagement policies are designed to identify and analyse these risks, to set appropriate risk limits and control, and tomonitor the risks and adherence to limits bymeans of reliable and up-to-date administrative and information systems. The Group regularly reviews its riskmanagement policies and systems to reflect changes inmarkets, products and emerging best practice. The Board recognises the critical importance of having efficient and effective risk management policies and systems in place. To this end, there is a clear organisational structurewith delegated authorities and responsibilities from the Board to Board Committees, executives and senior management. Individual responsibility and accountability are designed to deliver a disciplined, conservative and constructive culture of risk management and control. A description of the significant financial risk factors is given below together with the risk management policies applicable. 4.1 Financial risk factors The Group’s activities expose it to a variety of financial risks, which consist of market risk, credit risk and liquidity risk. Market risk includes foreign currency risk, interest rate risk and equity price risk. The Group’s overall riskmanagement programme focuses on the unpredictability of financial markets and seeks tominimise potential adverse effects on the financial performance of the Group. Written principles have been established throughout the Group for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, equity price risk, credit risk and liquidity risk. (a) Foreign exchange risk TheGroup operates internationally and is exposed to foreign exchange risk arising fromvarious currency exposures primarily with respect to certain major currencies. Entities in the Group use forward contracts to mitigate their exposure to foreign currency risk. Each subsidiary is responsible for managing the net position in each currency by using the relevant strategy, under advice from the Group’s Treasury. The Group holds foreign currency forwards and swaps. Swaps are contractual agreements between two parties to exchange streams of payments over time based on specified notional amounts, in relation tomovements in a specified underlying index.
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