Page 135 - Urban Renewal Authority 2023-24 Annual Report

3. Financial risk management and fair value of financial instruments (Continued)

(a) Financial risk factors (Continued)
(ii) Credit risk
Credit risk is managed on a group basis. Credit risk arises from investments, cash and bank
balances, building rehabilitation loans, and trade and other receivables.

The credit risk on investments at amortised cost is limited as issuers are mainly with high credit
ratings assigned by international credit rating agencies.

The credit risk on cash and bank balances is limited because most of the funds are placed in
banks with credit ratings, ranging from Aa1 to A3 and there is no concentration in any particular
bank.

The credit risk on building rehabilitation loans is limited as the Group has monitoring
procedures to ensure that follow-up action is taken to recover overdue debts and place charges
on the properties.

The credit risk on trade receivables is limited as rental deposits in the form of cash are usually
received from tenants.

The Group measures loss allowances for trade and lease receivables at an amount equal to
lifetime ECLs, which is calculated using a provision matrix. Given the Group has not experienced
any significant credit losses in the past, the allowance for expected credit losses is insignificant.

(iii) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of
funding through committed credit facilities.

Management monitors rolling forecasts of the Group’s cash and bank balances on the basis of
expected cash flow.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based
on the remaining period from the end of the reporting period to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due
within 12 months equal their carrying amounts (except for debt securities issued which include
interest element), as the impact of discounting is insignificant.

URA ANNUAL REPORT 2023-24 133