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41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe main risks arising from the Group’s financial assets and liabilities are foreign exchange, interest rate, credit andliquidity risk. The Group’s overall risk management seeks to minimise potential adverse effects of these risks on thefinancial performance of the Group.The Group has established risk management policies, guidelines and control procedures to manage its exposure tofinancial risks. Hedging transactions are determined in the light of commercial commitments. Derivative financialinstruments are used only to hedge underlying commercial exposures and are not held for speculative purposes.(a)Foreign Exchange RiskThe foreign exchange risk of the Group predominately arises from borrowings denominated in foreign currencies.The Group has cross-currency swaps and forward foreign exchange contracts that are primarily used to hedgeselected long term foreign currency borrowings to reduce the foreign currency exposures on these borrowings.The main currency exposure is US Dollar.The Group comprise subsidiaries, jointly controlled entities and associates operating in foreign countries, whichgenerate revenue and incur costs denominated in foreign currencies. The main currency exposures are SingaporeDollar, Sri Lanka Rupee, Bangladesh Taka, Indian Rupee and Indonesian Rupiah as well as borrowings denominatedin US Dollar.The Group’s foreign exchange objective is to achieve the acceptable level of foreign exchange fluctuation on theGroup’s assets and liabilities and manage the consequent impact to the income statements. To achieve thisobjective, the Group targets a composition of currencies based on assessment of the existing exposure anddesirable currency profile. To obtain this composition, the Group uses various types of hedging instruments suchas cross-currency swaps and forward foreign exchange contracts as well as maintaining funds in foreign currenciesat appropriate levels to support operating cash flow requirements.(b) Interest Rate RiskThe Group has cash and bank balances and deposits placed with creditworthy licensed banks and financialinstitutions. The Group manages its interest rate risk by actively monitoring the yield curve trend and interest ratemovement for the various investment classes.The Group’s debts include bank overdrafts, bank borrowings, bonds, and notes. The Group’s interest rate riskobjective is to manage the acceptable level of rate fluctuation on the interest expense. In order to achieve thisobjective, the Group targets a composition of fixed and floating debt based on assessment of its existing exposureand desirable interest rate profile. To obtain this composition, the Group uses various types of hedging instrumentssuch as interest rate swaps.Annual Report 2009 • 267