252 F INANC IAL Statements 05 Sect ion Ranhi ll Ut i l i t i es Berhad NOTES TO THE F INANC I AL STATEMENTS For the year ended 31 December 2022 45. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Contd.) (a) Credit risk (contd.) Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 24. Deposits with banks and other financial institutions that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 24. An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. (b) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.
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