RISK GOVERNANCE AND INTERNAL CONTROL FINANCIAL MANAGEMENT The Group operates internationally and is exposed to a variety of financial risks, including currency risk, interest rate risk, credit risk and liquidity risks. As part of the Group’s Enterprise Risk Management framework, Group treasury policies and financial authority limits are documented and reviewed periodically. The policies set out the parameters for management of Group liquidity, counterparty risk, foreign exchange and derivative transactions and financing. The Group utilises various financial instruments to manage exposures to interest rate and foreign exchange risks arising from operational, financing and investment activities. Transactions such as swaps, options and contracts for difference hedge the Group against fluctuations in the market prices of the underlying instruments. The Group monitors and hedges, where appropriate, its exposure to fluctuations in interest rates and foreign exchange rates. Exposures to foreign currency risks are also hedged naturally where possible. The financial authority limits seek to limit and mitigate operational risk by setting out the threshold of approvals required for the entry into contractual obligations and investments. Impact assessment and stress tests are performed to gauge the Group’s exposure to changing market situations, allowing for informed decision-making and implementation of prompt mitigating actions. We also regularly monitor the concentration of exposure in the countries where the Group operates. The Group’s principal financial instruments comprise bank loans, finance leases, cash and bank balances. The main purpose of these financial instruments is to finance the Group’s operations. All financial transactions with the banks are governed by banking facilities duly accepted with Board of Directors resolutions and banking mandates which define the permitted financial instruments and facilities limits, approved by the Board of Directors. All financial transactions require dual signatories. The Group has various other financial assets and liabilities such as trade receivables, trade payables, and lease liabilities which arise directly from its operations. CREDIT RISK Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s exposure to credit risk arises primarily from trade and other receivables, and contract assets. For other financial assets (including other investments and cash and bank balances), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. In respect of credit risk arising from the inability of customers of the Group to make payments when their receivables fall due, it is the Group’s policy to provide credit terms to creditworthy and reputable customers. These receivables are monitored on an ongoing basis to ensure that issues arising from non-collectibility are minimised. Exposure to Credit Risk The Group’s maximum exposure to credit risk, in the event that the counter-parties to the transactions with the Group fails to perform their obligations at the end of reporting period in relation to each class of recognised financial assets, is the carrying amount of those assets as indicated in the balance sheet, and is generally limited to the amounts, if any, by which the counter-parties’ obligations exceed the obligations of the Group. The Group has no significant concentration of credit risk. LIQUIDITY RISK Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. The Group’s and the Company’s liquidity risk management policy is to maintain sufficient liquid financial assets and standby credit facilities with different banks. At the end of the reporting period, 98% (2024: 84%) of the Group’s loans and borrowings (Note 14) of the financial statements will mature in less than one year based on the carrying amount reflected in the financial statements. 70 CSE GLOBAL LIMITED
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