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FoR BetteR RetuRns Annual Report 2022 209

notes to the
financial statements
for the year ended 31 december 2022

32. EMPLOYEE BENEFITS (CONTINUED)
(e) the sensitivity analysis below are determined based on a method that extrapolates the occurrence of reasonable
changes in the key assumptions in the same statement of financial position whereby all other assumptions remain
constant:
Group and KWAP
31 December 2022 31 December 2021
RM’000 RM’000
Increase Decrease Increase Decrease
discount rate (1% movement) (950) 1,258 (852) 1,132
medical inflation rate (1% movement) 118 (288) 109 (259)
(832) 970 (743) 873

33. FINANCIAL RISK
the group and KWap are exposed to financial risks arising from their operations and the use of financial instruments.
the key financial risks include interest rate risk, equity price risk, credit risk and liquidity risk.
the group and KWap have an approved set of guidelines and policies as well as internal controls which set out the
overall business strategies for the management of the risks. the overall financial risk management objective is to
enhance the contributors’ value through the effective management of the risks.

the policies and procedures of risk management are reviewed and approved by the board. the following sections
provide the details regarding the group’s and KWap’s exposure to the above-mentioned financial risks as well as the
objectives, policies and processes for the management of these risks.
(a) Interest rate risk

interest rate risk is the risk of the fluctuation of fair value or future cash flows of financial instruments due to
changes in the market interest rates. the group’s and KWap’s exposure to the risk of changes in the market
interest rates relate primarily to loans and receivables and external borrowings with floating interest rates.
the group and KWap actively manage the interest rate risk with the maintenance of an interest rate cover ratio of
a minimum of one and a half times.
Interest rate sensitivity

the following table demonstrates the sensitivity to the reasonable possible change in interest rates on the portion
of borrowings. With all other variables held constant, the table summarises the group’s and KWap’s exposure to
interest rate risk on the loans and receivables and external borrowings with floating interest rates and fixed income
securities.