ENRICHING LIVES EXPANDING HORIZONS - Maxis

MAXIS BERHAD
ANNUAL REPORT 2011
177
33 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks, including market risk (interest rate risk and foreign exchange risk),
credit risk, liquidity risk and capital risk. The Group’s overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses
derivative financial instruments to hedge designated risk exposures of the underlying hedge items and does not enter into
derivative financial instruments for speculative purposes.
Financial risk management is carried out by the Chief Financial Officer in consultation with the relevant departments under
policies/mandates approved by the Board of Directors. The policy provides written principles for overall risk management, as well
as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and use of derivative financial
instruments.
(a) Market risk
Market risk is the risk that the fair value or future cash flow of the financial instruments that the Group has will fluctuate
because of changes in market prices. The various components of market risk that the Group is exposed to are discussed
below.
(i) Foreign exchange risk
The objectives of the Group’s currency risk management policies are to allow the Group to effectively manage the
foreign exchange fluctuation against its functional currency that may arise from future commercial transactions
and recognised assets and liabilities. Forward foreign currency exchange contracts are used to manage foreign
exchange exposures arising from all known material foreign currency denominated commitments as and when they
arise and to hedge the movements in exchange rates by establishing the rate at which a foreign currency monetary
item will be settled. Gains and losses on foreign currency forward contracts entered into as hedges of foreign
currency monetary items are recognised in the financial statements when the exchange differences of the hedged
monetary items are recognised in the financial statements. Cross currency interest rate swap contracts are also used
to hedge the volatility in the cash flow attributable to variability in the foreign currency denominated borrowings
from the inception to maturity of the borrowings.
The currency exposure of financial assets and financial liabilities of the Group and Company that are not
denominated in the functional currency of the respective companies are set out below. Currency risks in respect of
intragroup receivables and payables have been included in the Group’s currency exposure table as this exposure is
not eliminated at the Group level.