Amal Ltd 2020-21

101 The Risk Management Committee of the Company is supported by the Finance team and experts who provide assurance that the financial risk activities of the Company are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the policies and risk objectives of the Company. The objective of the Management is to maintain financial risk and market risk within acceptable parameters, while optimising returns. This note explains the risks that the Company is exposed to and how the Company manages the risks in the Standalone Financial Statements. Risk Exposure arising from Measurement Management Credit risk Cash and cash equivalents, trade receivables, financial assets measured at amortised cost Aging analysis and credit rating Diversification of investments in mutual fund and credit limits Liquidity risk Borrowings and other liabilities Rolling cash flow forecasts Availability of committed credit lines and borrowing facilities a) Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, financial assets measured at amortised cost or fair value through profit and loss and deposits with banks and financial institutions, as well as credit exposures to trade | non-trade customers including outstanding receivables. i) Credit risk management Credit risk is managed through the policy surrounding Credit Risk Management. ii) Provision for expected credit losses The Company provides for expected credit loss based on the following: Trade receivables Trade receivables consist of few customers, majorly of amount receivable from Atul Ltd, the holding company for which ongoing credit evaluation is performed on the financial condition of the account receivables. Historical experience of collecting receivables of the Company is supported by low level of past default and hence the credit risk is perceived to be low. The Company determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Company has considered subsequent recoveries, past trends, credit risk profiles of the customers based on their industry, macroeconomic forecasts and internal and external information available to estimate the probability of default in future and has taken into account estimates of possible effect from the COVID-19 pandemic. Note 25.7 Financial risk management (continued)