N o t e s t o t h e f i n a n c i a l s t a t e m e n t s
Year ended 31 March 2015
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 benefits 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 reflect 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 firm (“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 financial loss resulting from the failure of tenants or counterparties of the Group, to settle its
financial 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 specific tenants or counterparties.
The allowance account is used to provide for impairment losses. Subsequently when the Group is satisfied that no recovery
of such losses is possible, the financial asset is considered irrecoverable and the amount charged to the allowance account
is then written off against the carrying amount of the impaired financial asset.
Cash at bank and fixed deposits are placed with financial institutions which are regulated.
As at the reporting date, except as disclosed in Note 11, there were no significant concentrations of credit risk. The
maximum exposure to credit risk is represented by the carrying value of each financial asset, including derivative financial
instruments, on the Balance Sheets.
Liquidity risk
The Manager monitors and maintains a level of cash and cash equivalents deemed adequate to finance the Group’s
operations and to mitigate the effects of fluctuations in cash flows. Typically, the Group ensures that it has sufficient cash
on demand to meet expected operational expenses for a reasonable period, including the servicing of financial 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 and a Multicurrency Medium Term Note Programme with a
programme limit of $5.0 billion (Note 16).
The following are the expected contractual undiscounted cash outflows of financial liabilities, including estimated interest
payments and excluding the impact of netting arrangements:
ASCENDAS REAL ESTATE INVESTMENT TRUST ANNUAL REPORT 2014/15
