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27 FINANCIAL INSTRUMENTS (CONT’D)
Risk management framework
This note presents information about the exposure of the HBT Group, the H-REIT Group and the Stapled Group to each
of the above risks, their objectives, policies and procedures for measuring and managing risk, and their management
of capital.
Risk management is integral to the whole business of the Stapled Group. The Stapled Group has a system of controls in
place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The HBT
Trustee-Manager and the H-REIT Manager continually monitor the Stapled Group’s risk management process to ensure
that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Stapled Group’s activities.
The Audit and Risk Management Committees of the H-REIT Manager and HBT Trustee-Manager assist the H-REIT
Manager’s and HBT Trustee Manager’s Boards in reviewing the effectiveness of the Stapled Group’s material internal
controls, including those relating to financial, operational and compliance.
In addition, the Audit and Risk Management Committees of the H-REIT Manager and HBT Trustee-Manager also assist
the H-REIT Manager’s and HBT Trustee-Manager’s Boards in discharging its duties with respect to maintaining an
effective control environment that reflects both the established risk appetite and the business objectives of the Stapled
Group. The Audit and Risk Management Committees oversee how management monitors compliance with the Stapled
Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in
relation to the risks faced by the Stapled Group.
Credit risk
Credit risk is the risk of financial loss resulting from the failure of a customer or counterparty to a financial instrument
fails to settle its financial and contractual obligations to the Stapled Group, as and when they fall due.
The carrying value of financial assets in the statement of financial position represents maximum exposure of the Stapled
Group of credit risk, before taking into account any collateral held. The Stapled Group do not hold any collateral in
respect of their financial assets.
Trade and other receivables
Credit evaluations are performed before lease agreements are entered into with tenants. Rental deposits are received,
where appropriate, to reduce credit risk. In addition, the balances due from lessees and tenants are being monitored
on an on-going basis.
The hotel/resort operators which manage the hotels under the HBT Group perform credit evaluations on customers
before accepting customers and monitor their balances on an on-going basis.
The Stapled Group establishes an allowance for impairment, based on a specific loss component that relates to
individually significant exposures, that represents its estimate of incurred losses in respect of trade and other receivables.
The allowance account in respect of trade and other receivables is used to record impairment losses unless the Stapled
Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered
irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the
impaired financial asset.
At 31 December 2015 and 31 December 2014, except as described in Note 9 to the financial statements, there was no
significant concentration of credit risk. The maximum exposure to credit risk is represented by the carrying value of each
financial asset on the statement of financial position.
NOTES TO THE FINANCIAL STATEMENTS
