KENANGA ANNUAL REPORT 2017

50. FINANCIAL RISK MANAGEMENT (CONT’D.) (b) Market risk (cont’d.) (iii) Equity price sensitivity analysis Equity price risk is the risk of financial loss arising from adverse changes in prices of equities and equity derivatives. The following table demonstrates the impact of a +/– 30% change in equity prices across the board on the Group’s profit or loss and equity. Percentage Impact Percentage Impact Change in on Profit Impact Change in on Profit Impact Equity or Loss on Equity Equity or Loss on Equity Price 2017 2017 Price 2016 2016 2017 RM’000 RM’000 2016 RM’000 RM’000 +30% 7,994 – +30% 75,322 – -30% (31,198) – -30% (98,725) – From risk management perspective, a risk limits framework governing the activities of equity and equity derivatives trading has been established, primarily intended to: 1) Prevent excessive exposures to a single risk factor or a group of risk factors. 2) Constrain the general level of risk taking for a business. Additionally, other components of limit framework including loss trigger, issuance size, permitted products, management oversights etc. were put in place for better governance as well as to embrace best practices of market risk management. The risk framework was designed in accordance to the Bank’s risk appetite and a closely controlled risk parameter, e.g. loss trigger, will ensure losses arising from the course of trading are limited. In addition, the Group’s associate company has made some equity investments in Saudi Arabia, with a total mark- to-market value of SAR 24.5 million. The impact of a +/– 30% change in equity prices on the Group’s profit or loss arising from these investments are shown as follows: Percentage Impact Percentage Impact Change in on Profit Impact Change in on Profit Impact Equity or Loss on Equity Equity or Loss on Equity Price 2017 2017 Price 2016 2016 2017 RM’000 RM’000 2016 RM’000 RM’000 +30% – 7,959 +30% – 9,619 -30% – (7,959) -30% – (9,619) Annual Report 2017 31 December 2017 199 notes to the financial statements