FGV Annual Report 2014

4 Financial Risk Management (continued) (a) Financial risk management policies (continued) Market risk (i) Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the United State Dollar (“USD”). Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations but excludes interest in foreign joint ventures and associates. The Group generally manages its currency exposure through foreign currency forward contracts. A 10% strengthening/weakening of the USD against the Malaysian Ringgit (“RM”) at the date of statement of financial position would have a lower/higher impact to Group’s profit after tax of approximately of RM26,368,000 (2013: RM16,077,000 higher/lower). The above exposure mainly as a result of foreign exchange gains/losses on translation of foreign currency denominated deposits, cash and bank balances, trade receivables and payables, financial assets at fair value through profit or loss and foreign exchange losses/gains on translation of foreign currency denominated borrowings. The analysis assumes that all other variables remain constant. (ii) Price risk Price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices (other than finance or exchange rates). Equity price risk The Group is exposed to equity price risk arising from its investment in quoted and unquoted equity instruments. The quoted equity investments are listed on the Bursa Malaysia and foreign stock exchanges and classified as available-for-sale financial assets or financial asset at fair value through profit or loss based on the purpose for which the quoted equity investments were acquired. Unquoted investments are valued using the Price Earnings (“PE”)/Price to Book (“PB”) comparative method and classified as available-for-sale financial assets. The sensitivity analysis in relation to equity price risk is as follows: Group 2014 2013 Impact Impact to profit Impact to profit Impact Financial assets Sensitivity factor after tax to equity after tax to equity RM’000 RM’000 RM’000 RM’000 Available-for: – sale – unquoted Comparable PE multiple and PB multiple variance by 5% – 10,289 – 9,014 – quoted Share price variance by 5% – 204 – 205 Fair value through profit or loss – quoted Share price variance by 5% 804 – 680 – Total impact 804 10,493 680 9,219 Felda Global Ventures Holdings Berhad pg 200 NOTES TO THE FINANCIAL STATEMENTS For The Financial Year Ended 31 December 2014