Amal Ltd 2020-21

Amal Ltd | Annual Report 2020-21 This note explains the risks which the Group is exposed to and how the Group manages the risks in the Consolidated 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 Group 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 Group 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 Group is supported by low level of past default and hence the credit risk is perceived to be low. The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The Group 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. b) Liquidity risk Ultimate responsibility for liquidity risk management rests with the Board of Directors, who has approved an appropriate liquidity risk management framework for short, medium and long-term funding and liquidity management requirements of the Group. The Management monitors rolling forecasts of the liquidity position of the Group and cash and cash equivalents on the basis of expected cash flows and manages liquidity risk by continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities. The following table shows the maturity analysis of financial liabilities of the Group based on contractually agreed undiscounted cash flows including contractual interest payment, as at the Balance Sheet date: Note 25.7 Financial risk management (continued)