4 FINANCIAL RISK MANAGEMENT Continued 4.1 Financial risk factors Continued (a) Foreign exchange risk Continued The sensitivity of the profit before tax with regards to the Group’s financial assets and liabilities and the EURO to Mauritian Rupee, USD to Mauritian Rupee and KES to Mauritian Rupee exchange rate is shown below. If Mauritian Rupee had weakened/strengthened by 4% against EURO, USD and KES respectively, the financial impact would be as follows: GROUP COMPANY EUR USD KES EUR USD Sep-23 MUR m MUR m MUR m Total MUR m MUR m Total Effect on profit before tax (+/-) 0.1 29.0 0.6 29.7 0.1 (9.1) (9.0) Equity (+/-) 0.1 24.1 0.5 24.7 0.1 (7.6) (7.5) GROUP COMPANY EUR USD KES EUR USD Sep-22 MUR m MUR m MUR m Total MUR m MUR m Total Effect on profit before tax (+/-) 0.1 10.5 (0.2) 10.4 0.1 5.5 5.6 Equity (+/-) 0.1 8.7 (0.2) 8.6 0.1 4.6 4.7 In 2023 the 4% change in rates used (2022: 4%) above is derived from the average fluctuation in the respective foreign currencies for the last 3 years (2022: 5 years). Due to high volatility in the foreign exchange rates, in 2023 the average fluctuation rate in foreign currencies has been calculated using three years of historic data. (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 and Company’s exposure to interest rate risk (IRR) and positive balances relate primarily to its borrowings and lendings with floating interest rates. The Group and Company mitigate its interest rate risk by having a mixed portfolio of fixed and variable interest bearing lendings and borrowings. For those lendings and borrowings with floating interest rates, the Group and Company ensure 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 - 88 basis points (2022: +/- 12 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. GROUP COMPANY Sep-23 MUR m Sep-22 MUR m Sep-23 MUR m Sep-22 MUR m Effect on profit before tax (+/-) 11.3 0.5 11.3 0.5 EXPLANATORY NOTES 30 SEPTEMBER 2023 132 CIM FINANCE ANNUAL REPORT
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