Annual Report - QuamIR

Notes to the Consolidated Financial Statements (Continued)
3 Financial risk management (Continued)
3.1 Financial risk factors (Continued)
(a)
Market risk (Continued)
(ii)
Interest rate risk
The Group’s interest-rate risk arises from bank
borrowings. Borrowings issued at variable rates
expose the Group to cash flow interest rate risk
due to fluctuation of the prevailing market interest
rate. The Group’s income and operating cash flows
are substantially dependent of changes in market
interest rates.
The Group does not use any derivative contracts to
hedge its exposure to interest rate risk. However,
management will consider hedging significant
interest rate exposures should the need arise.
As at 31 December 2011, if the interest rate had
increased/decreased 100 basis points with all other
variables held constant, the Group’s profit before
income tax would have decreased by HK$28.0
million or increased by HK$27.9 million (2010:
the Group’s loss before income tax would have
increased/decreased by HK$33.1 million).
3
3.1
(a)
(ii)
100
28,000,000
27,900,000
33,100,000
(iii)
Price risk
The Group has minimal exposure to price risk in
2010 and 2011.
(iii)
(b)
Credit risk
The Group is exposed to credit risk in its restricted
cash, cash and cash equivalents and trade and other
receivables.
(b)
The carrying amount of restricted cash, cash and cash
equivalents and trade and other receivables, represent the
Group’s maximum exposure to credit risk in relation to its
financial assets.
To manage the credit risk associated with restricted cash
and cash and cash equivalents, most of the deposits are
mainly placed with certain state-owned banks in the PRC
which are high-credit quality financial institutions and banks
with high credit rankings in Hong Kong.
110 HKC (Holdings) Limited • Annual Report 2011