Page 225 - Kolte Patil AR 2019-20

Notes forming part of the Consolidated Financial Statements

ii) Financial risk management objectives
I
n the course of its business, the group is exposed primarily to fluctuations in interest rates, equity prices, liquidity and credit risk, which
may adversely impact the fair value of its financial instruments. The group assesses the unpredictability of the financial environment and
seeks to mitigate potential adverse effects on the financial performance of the group.

iii) Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: currency risk, interest rate risk and other price risk such as equity price risk and commodity
price risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return. Future specific market movements cannot be normally predicted with reasonable accuracy.

Currency risk:
The Company does not have material foreign currency transactions. The company is not exposed to risk of change in foreign currency.

Interest rate risk:

I
nterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company is not exposed to the risk of changes in market interest rates as the Company does not have any long-term
debt obligations with floating interest rates.

Other price risk:
The Company is not exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than
trading purposes. The Company does not actively trade these investments.

iv) Interest risk management
The group’s interest rate exposure is mainly related to debt obligations. The group obtains debt to manage the liquidity and fund
requirements for its day to day operations. The rate of interest is fixed and thus there is no risk of interest rates fluctuating.

v) Credit risk management
Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms
or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as
concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to
whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, unbilled revenue,
investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial
instruments of the Group result in material concentration of credit risk.

vi) Liquidity risk
Liquidity risk refers to the risk that the group cannot meet its financial obligations. The objective of liquidity risk management is to
maintain sufficient liquidity and ensure that funds are available for use as per requirements. The group manages liquidity risk by
maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash
flows, and by matching the maturity profiles of financial assets and liabilities.

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