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ASCENDAS REAL ESTATE INVESTMENT TRUST 186
NOTESTOTHE FINANCIAL STATEMENTS
Year ended 31 March 2014
31 FINANCIAL RISK MANAGEMENT (continued)
Overview of risk management
Risk management is integral to the whole business of the Group. The Manager of the Trust has a system of controls in place to create
an acceptable balance between the benefts derived from managing risks and the cost of managing those risks. The Manager also
monitors the Group’s risk management process closely to ensure an appropriate balance between control and business objectives
is achieved. Risk management policies and systems are reviewed regularly to refect changes in market conditions and the Group’s
strategic direction.
The Audit Committee of the Manager oversees how management monitors compliance with the Group’s risk management policies and
procedures and reviews the adequacy of the risk management framework in relation to the Group’s exposure to those risks. The Audit
Committee’s oversight role is assisted by an internal audit function which is outsourced to an independent professional frm (“Internal
Audit”). Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which
are reported to the Audit Committee.
Credit risk
Credit risk is the potential fnancial loss resulting from the failure of tenants or counterparties of the Group, to settle its fnancial and
contractual obligations, as and when they fall due.
The Manager has an established process to evaluate the creditworthiness of its tenants and prospective tenants to minimise potential
credit risk. Credit evaluations are performed by the Manager before lease agreements are entered into with prospective tenants.
Security in the form of bankers’ guarantees, insurance bonds or cash security deposits are obtained prior to the commencement of the
lease.
The Manager establishes an allowance account for impairment that represents its estimate of losses in respect of trade and other
receivables. The main component of this allowance is estimated losses that relate to specifc tenants or counterparties.
The allowance account is used to provide for impairment losses. Subsequently when the Group is satisfed that no recovery of such
losses is possible, the fnancial asset is considered irrecoverable and the amount charged to the allowance account is then written of
against the carrying amount of the impaired fnancial asset.
Cash at bank and fxed deposits are placed with fnancial institutions which are regulated.
As at the reporting date, except as disclosed in Note 11, there were no signifcant concentrations of credit risk. The maximum exposure
to credit risk is represented by the carrying value of each fnancial asset, including derivative fnancial instruments, on the Balance
Sheet.
Liquidity risk
The Manager monitors and maintains a level of cash and cash equivalents deemed adequate to fnance the Group’s operations and to
mitigate the efects of fuctuations in cash fows. Typically, the Group ensures that it has sufcient cash on demand to meet expected
operational expenses for a reasonable period, including the servicing of fnancial obligations.
The Group strives to maintain available banking facilities at a reasonable level to meet its investment opportunities. The Group has in
place various bilateral banking credit facilities totalling $2,039.3 million (2013: $1,788.8 million), of which $959.0 million (2013: $648.8
million) has been utilised as at 31 March 2014. In addition, the Trust has in place a $1.0 billion Multicurrency Medium Term Note
Programme which was established in March 2009 to diversify sources of funds for the Trust. As at 31 March 2014, medium term notes
amounting to $200.0 million (2013: $325.0 million) and $301.1 million (JPY24.6 billion) (2013: $258.3 million (JPY19.6 billion)) which
were issued under this programme are still outstanding.