Annual Report 2021

CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED 174 Notes to the Consolidated Financial Statements For the year ended 31 December 2021 37. FINANCIAL RISK MANAGEMENT (CONTINUED) 37.1 Financial risk factors (continued) (ii) Credit risk and impairment assessment Credit risk arises if a customer or other counterparty fails to meet its contractual obligations. As at 31 December 2021, other than those financial assets whose carrying amounts best represent the maximum exposure to credit risk, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group arising from the amount of contingent liabilities in relation to financial guarantees provided by the Group is disclosed in note 40(d). Credit risk on trade debtors is managed by the management of the individual business units and monitored by the Group’s management on a group basis. The Group’s trade debtors are mainly contributed by ports operation where their customers are mainly sizable and renowned international liners or market leaders in their industries with manageable credit risk. Management assesses, reviews and updates credit profile of the Group’s trade debtors by considering its financial position, past experience and other relevant factors, in order to identify if any are of higher risks of default. For trade debtors spotted as of higher credit risks, management of the Group also implemented measures such as tightened credit terms and closer monitoring of the settlement patterns. Debtors with overdue balances will be requested to settle their outstanding balance. In addition, the Group performs impairment assessment under ECL model on trade balances individually for trade debtors with significant balances and collectively for others based on appropriate groupings. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced. Regarding amount due from fellow subsidiaries and immediate holding company, and amount due from/ advance to associates and joint ventures, the management of the Group assesses the recoverability by reviewing the financial position and results of the related parties periodically and considers the credit risk to be insignificant. The Group accounts for its credit risk on other debtors and compensation receivable from SLRC by performing credit evaluation and appropriately providing expected credit losses on a timely basis. The credit evaluations focus on the historical loss rates and adjusts for information specific to the other debtors and forward looking information. Regarding financial guarantee contracts, the management of the Group performs impairment assessments by reviewing the financial position and results of the related parties periodically and considers the credit risk to be insignificant. The Group has policies that limit the amount of credit exposure to any financial institutions. The Group’s bank deposits are all deposited in reputable banks or financial institutions. Management considers that the credit risk associated with the deposits with these banks and financial institutions is low.