15 FINANCIAL RISK MANAGEMENT (CONTINUED)
15.2 Risk management framework
The Group’s activities expose it to market risk (including profit rate risk), credit risk and liquidity risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring and managing risk, and the Group’s management
of capital.
Risk management is integral to the whole business of the Group. The Manager has implemented a
system of controls in place to create an acceptable balance between the benefits derived from managing
risks and the cost of managing those risks. The Manager also monitors the Group’s risk management
process closely to ensure an appropriate balance between control and business objectives is achieved.
Risk management policies and systems are reviewed regularly to reflect changes in market conditions and
the Group’s strategic direction.
The Audit Committee of the Manager assists the Board in overseeing how the Manager monitors
compliance with the Group’s risk management policies and procedures and reviews the adequacy of
the risk management framework in relation to the Group’s exposure to those risks. The Audit Committee
is assisted in its oversight role by an internal audit function which is outsourced to an independent
professional firm (“Internal Audit”). Internal Audit undertakes both regular and ad-hoc reviews of risk
management controls and procedures, the results of which are reported to the Audit Committee.
15.3 Credit risk
Credit risk is the risk of financial loss to the Group resulting from the failure of a tenant or counterparty of
the Group, to settle its financial and contractual obligations, as and when they fall due.
The carrying amount of financial assets in the Statement of Financial Position represents the Group
and the Trust’s maximum exposure to credit risk. The maximum exposure to credit risk at the reporting
date was:
Group
Trust
2014
2013
2014
2013
$’000
$’000
$’000
$’000
Loans and receivables
8,228
6,017
8,228
6,017
Cash and cash equivalents
12,287
17,084
12,282
17,078
20,515
23,101
20,510
23,095
The Manager has an established process to evaluate the creditworthiness of its tenants and prospective
tenants to minimise potential credit risk. Credit evaluations are performed by the Property Manager
and the Manager before lease agreements are entered into with prospective tenants. Security in the
form of bankers’ guarantees, insurance bonds or cash security deposits are obtained prior to the
commencement of the lease. As such, the Manager believes that no impairment allowance is necessary
in respect of loans and receivables as these amounts mainly arise from tenants who have good payment
records and have placed sufficient security with the Group in the form of bankers’ guarantees or cash
security deposits.
Year ended 31 December 2014
NOTES TO THE FINANCIAL STATEMENTS
SABANA REIT
|
ANNUAL REPORT 2014
125
