| CIM FINANCE. INTEGRATED REPORT 2022 134 EXPLANATORY NOTES 30 SEPTEMBER 2022 4. FINANCIAL RISK MANAGEMENT (CONT’D) 4.1 Financial risk factors (Cont’d) (a) Foreign exchange risk (Cont’d) The sensitivity of the profit before tax with regards to the Group’s financial assets and liabilities and the USD to Mauritian Rupee and EURO to Mauritian Rupee exchange rate is shown below. If Mauritian Rupee had weakened/strengthened by 4% against USD and EURO respectively, the financial impact would be as follows: The 4% change in rates used above was derived from the average fluctuation in the respective foreign currencies for the last 5 years. (b) Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or fair value of financial instruments. The Group’s exposure to interest rate risk (IRR) and positive balances relate primarily to its borrowings and lendings with floating interest rates. The Group mitigates its interest rate risk by having a mixed portfolio of fixed and variable interest bearing lendings and borrowings. The scenario management tools through microsoft excel method and the Local Sensivity Analysis approach has been used to analyse the sensivity analysis. The local sensivity analysis is a one-at-a-time (OAT) technique analyses the impact of one parameter on the cost function at a time, keeping the other parameters fixed. For those lendings and borrowings with floating interest rates, the Group ensures that the losses that may be created or reduced following interest margins change are not significant by setting limits on the level of mismatch in interest rate repricing that may be undertaken. The sensitivity of the profit before tax to a reasonably possible change in interest rate of + or - 50 basis points (2021: +/- 50 basis points), with all other variables held constant is shown below. The sensitivity has been based on the net exposure of financial assets and liabilities at the reporting date. These changes are considered to be reasonably possible based on observations of current market conditions. (c) Equity price risk Equity price risk is the risk that the fair value of equity securities fluctuates as a result of the changes in the prices of those securities. The Group is not exposed to significant equity price risks as it does not have any significant equity financial assets. (d) Credit risk Credit risk is defined as the potential that a borrower or counterparty will fail tomeet its obligations in accordancewith agreed terms. Credit risk in the Group arises mainly from various forms of lending from all its core activities covering all the credit portfolios; credit facilities, money lending, credit cards, factoring, and leasing as well as deposits and balances held with banks. The effective management of credit risk is a critical component of risk management and essential to the long-term success of the organisation. The RiskManagement Committee has oversight of themanagement of the credit risk framework. The objective of the Group’s credit riskmanagement framework is to ensure all material credit risks towhich the organisation is exposed are identified, measured, managed, monitored, mitigated and reported on a consistent basis. GROUP COMPANY Sep-22 MUR m Sep-21 MUR m Sep-22 MUR m Sep-21 MUR m Effect on profit before tax (+/-) 10.4 7.5 5.6 1.5 Equity (+/-) 5.8 6.2 6.2 - GROUP COMPANY Sep-22 MUR m Sep-21 MUR m Sep-22 MUR m Sep-21 MUR m Effect on profit before tax (+/-) 2.3 3.2 2.3 3.2
RkJQdWJsaXNoZXIy MzQ3MjQ5