Rex International Holding Limited 2 3 3 NOTES TO THE FINANCIAL STATEMENTS 37 FINANCIAL INSTRUMENTS (CONTINUED) Financial risk management (continued) This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Risk management framework Risk management is integral to the whole business of the Group. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Enterprise Risk Management Framework provides the principal policy and guidance to the Group and its businesses on the risk management methodology and reporting of risks. It sets out a systematic and ongoing process for identifying, evaluating, controlling and reporting risks. These processes are put in place to manage and monitor the Group’s risk management activities on a regular and timely basis. The Group’s risk management efforts covers operational, financial and strategic areas. Credit risk Credit risk is the risk of financial loss to the Group or the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s and the Company’s financial assets. The carrying amount of financial assets represent the Group’s and the Company’s maximum exposures to credit risk, before taking into account any collateral held. The Group recognises loss allowances for expected credit losses (“ECLs”) on financial assets measured at amortised cost. Loss allowances of the Group are measured on either of the following bases: • 12-month ECLs: these are ECLs that result from default events that are possible within the 12 months after the reporting date (or for shorter period if the expected life of the instrument is less than 12 months); or • Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument or contract assets.
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