Annual Report 2021

ANNUAL REPORT 2021 173 37. FINANCIAL RISK MANAGEMENT (CONTINUED) 37.1 Financial risk factors (continued) (i) Market risk (continued) (c) Fair value interest rate risk and cash flow interest rate risk The Group’s interest rate risk mainly arises from interest-bearing borrowings. Financial assets and financial liabilities issued at variable rates expose the Group to cash flow interest rate risk whilst borrowings issued and lease liabilities at fixed rates expose the Group to fair value interest rate risk. The Group adopts a policy of maintaining an appropriate mix of fixed and floating rate borrowings which is achieved primarily through the contractual terms of borrowings. The position is regularly monitored and evaluated by reference of anticipated changes in market interest rate. The Group did not use any interest rate swap to hedge its interest rate risk during the year. Other than advances to associates and a joint venture and bank deposits as at 31 December 2021, the Group has no significant interest-bearing assets. The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Accordingly, management does not anticipate any significant impact resulting from changes in interest rates on interest-bearing assets. At 31 December 2021, if interest rates on borrowings had been 100 basis points (2020: 100 basis points) higher/lower with all other variables held constant, profit before taxation would have been HK$124 million (2020: HK$143 million) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.