194 | CapitaLand Limited Annual Report 2014
Appendix
Notes to the Financial Statements
Year ended 31 December 2014
33 FINANCIAL RISK MANAGEMENT
(cont’d)
(b) Market risk
(cont’d)
(iii) Equity price risk
The Group does not have signimcant exposure to equity price risk as at 31 December 2014 and 31
December 2013.
(c) Credit risk
Credit risk is the risk of mnancial loss to the Group if a customer or counterparty to a mnancial instrument fails
to meet its contractual obligations. For trade receivables, the Group has guidelines governing the process
of granting credit as a service or product provider in its respective segments of business. Trade and other
receivables relate mainly to the Group’s customers who bought its residential units and tenants from its
commercial buildings, shopping malls and serviced residences. Investments and mnancial transactions are
restricted to counterparties that meet the appropriate credit criteria.
The principal risk to which the Group and the Company is exposed to in respect of mnancial guarantee contracts
is credit risk in connection with the guarantee contracts they have issued. To mitigate the risk, management
continually monitors the risk and has established processes including performing credit evaluations of the
parties it is providing the guarantee on behalf of. Guarantees are only given for the benemt of its subsidiaries
and related parties. The maximum exposure to credit risk in respect of these mnancial guarantees at the
balance sheet date is disclosed in note 36.
The Group has a diversimed portfolio of businesses and as at balance sheet date, there was no signimcant
concentration of credit risk with any entity. The maximum exposure to credit risk is represented by the carrying
amount of each mnancial asset in the balance sheet, including derivative mnancial instruments as well as any
irrevocable loan undertaking to associates and joint ventures.
(d) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its mnancial obligations as they fall due.
The Group actively manages its debt maturity promle, operating cash nows and the availability of funding
so as to ensure that all remnancing, repayment and funding needs are met. As part of its overall prudent
liquidity management, the Group maintains sufmcient level of cash or cash convertible investments to meet
its working capital requirement. In addition, the Group strives to maintain available banking facilities at a
reasonable level to its overall debt position. As far as possible, the Group will constantly raise committed
funding from both capital markets and mnancial institutions and prudently balance its portfolio with some
short term funding so as to achieve overall cost effectiveness.
