KENANGA ANNUAL REPORT 2017

50. FINANCIAL RISK MANAGEMENT (CONT’D.) The main risk areas faced by the Bank and the guidelines and policies adopted to manage them are as follows: (a) Credit risk Credit risk or the risk of counterparties defaulting, are minimised by the application of credit approvals, limits and monitoring procedures. Balance due from clients and brokers are monitored on an ongoing basis via periodic management reporting. The Group through its directors and management, reviews all significant exposures to individual customers and counterparties as well as any major concentration of credit risk related to any financial instrument. The Group has risk management procedures in place to manage these risks to ensure that all the procedures and principles relating to risk management are adhered to. Credit-related commitments risks The Bank enters into various commitments which include commitments to extend credit lines and obligation under underwriting agreements. Such commitments expose the Bank to similar risks to loans and financing and are mitigated by the same processes and policies. Risk concentration: maximum exposure to credit risk without taking account of any collateral and other credit enhancement The Group’s concentration risk is managed by counterparty and by industry sector. The Group applies single counterparty exposure limits (“SCEL”) to protect against unacceptably large exposures to single counterparty risk. The following table shows the maximum exposure to credit risk for the components of the statement of financial position, including derivatives, by industry before the effect of mitigation through the use of master netting and collateral agreements. Where financial instruments are recorded at fair value, the amounts shown represent the current credit risk exposure but not the maximum risk exposure that could arise in the future as a result of changes in values. The maximum exposure to credit risk for the components of the statement of financial position, including derivatives, by geography before the effect of mitigation through the use of master netting and collateral agreements is not presented as the Group’s activities are principally conducted in Malaysia. Annual Report 2017 31 December 2017 179 notes to the financial statements