ST Engineering Annual Report 2020

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2020 (CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED) C14 Financial risk management objectives and policies The Group has exposure to the following financial risks arising from its operations and the use of financial instruments: • Interest rate • Foreign exchange • Market • Liquidity • Credit The Group’s principal financial instruments, other than foreign exchange contracts and derivatives, comprise bank guarantees, performance bonds and bank loans, finance leases and hire purchase contracts, investments, cash and short-term deposits. All financial transactions with the banks are governed by banking facilities duly accepted with Board of Directors’ resolutions, with banking mandates, which define the permitted financial instruments and facilities limits. All financial transactions require dual signatories. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation. The purpose of engaging in treasury transactions is solely for hedging. The Group’s treasury mandates allow only foreign exchange spot, forward or non-deliverable forward, foreign exchange swap, cross currency swap, purchase of foreign exchange call, put or collar option, forward rate agreement, interest rate swap, purchase of interest rate cap, floor or collar option. These instruments are generic in nature with no embedded or leverage features and any deviation from these instruments would require specific approval from the Board of Directors. The policies for managing each of these risks are broadly summarised below: Interest rate risk As at reporting date, the interest rate profile of the interest-bearing financial instruments is: Group 2020 2019 $’000 $’000 Fixed rate instruments Financial assets 112,626 82,158 Financial liabilities (1,816,348) (840,378) (1,703,722) (758,220) Variable rate instruments Financial liabilities (242,847) (1,552,971) (242,847) (1,552,971) 20 3 ANNUAL REPORT 2 0 2 0 / CORPORATE OVERVI EW PERFORMANCE REVI EW SUSTAINABI L ITY CORPORATE GOVERNANCE F INANCIAL REPORT