Annual Report 2019

157 ANNUAL REPORT 2019 3. FINANCIAL RISK MANAGEMENT (CONTINUED) 3.1 Financial risk factors (continued) (i) Market risk (continued) (c) Fair value interest rate risk and cash flow interest rate risk (continued) At 31 December 2019, if interest rates on borrowings had been 100 basis points (2018: 100 basis points) higher/lower with all other variables held constant, post-tax profit for the year would have been HK$106 million (2018: HK$118 million) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings. (ii) Credit risk and impairment assessment Credit risk arises if a customer or other counterparty fails to meet its contractual obligations. As at 31 December 2019, other than those financial assets whose carrying amounts best represent the maximum exposure to credit risk, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group arising from the amount of contingent liabilities in relation to financial guarantees provided by the Group is disclosed in note 42(e). Credit risk on trade debtors is managed by the management of the individual business units and monitored by the Group’s management on a group basis. The Group’s trade debtors are mainly contributed by ports operation where their customers are mainly sizable and renowned international liners or market leaders in their industries with manageable credit risk. Management assesses, reviews and updates credit profile of the Group’s trade debtors by considering its financial position, past experience and other relevant factors, in order to identify if any are of higher risks of default. For trade debtors spotted as of higher credit risks, management of the Group also implemented measures such as tightened credit terms and closer monitoring of the settlement patterns. Debtors with overdue balances will be requested to settle their outstanding balance. In addition, the Group performs impairment assessment under ECL model on trade balances individually for trade debtors with significant balances and collectively for others based on appropriate groupings. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced. Regarding advances to fellow subsidiaries, associates, joint ventures and a related party, the management of the Group assesses the recoverability by reviewing the financial position and results of the related parties periodically and considers the credit risk to be insignificant. The Group had concentration of credit risk on amount due from a related party as at 31 December 2018 and credit risk of which was considered by the Group’s management as limited because the amount was fully secured, as set out in note 27. The full amount has been settled during the year. The Group accounts for its credit risk on other debtors by performing credit evaluation and appropriately providing expected credit losses on a timely basis. The credit evaluations focus on the historical loss rates and adjusts for information specific to the other debtors and forward looking information. The Group has policies that limit the amount of credit exposure to any financial institutions. The Group’s bank deposits are all deposited in reputable banks or financial institutions. Management considers that the credit risk associated with the deposits with these banks and financial institutions is low.