FGV Audited Financial Statements 2020

4 FINANCIAL RISK MANAGEMENT (continued) (a) Financial risk management policies (continued) Market risk (continued) (ii) Price risk (continued) Commodity price risk The Group is exposed to commodity price risk since the prices of crude palm oil (“CPO”) and their derivatives are subject to fluctuations due to unpredictable factors such as weather, changes in global demand and production, crude oil prices and global production of similar and competing crops. Revenue of the Group is therefore subject to price fluctuations in the commodity market. The Group uses derivative contracts to mitigate a portion of such risks. As at 31 December 2020, sensitivity analysis had been performed based on the Group’s exposure to commodity prices as at settlement date for the Group’s LLA liability and commodity derivative portfolios. A 10% increase in certain commodity price indexes or a RM200 increase in CPO prices assumed in calculating the LLA liability, with all other variables being held constant, would increase or decrease the Group’s profit after tax, by type of significant commodity and financial liability, by approximately: 2020 RM’000 2019 RM’000 - Palm oil 23,276 16,662 - LLA liability (242,978) (244,492) Net decrease (219,702) (227,830) A 10% decrease in certain commodity price indexes or a RM200 decrease in CPO prices assumed in calculating the LLA liability, with all other variables being held constant, would increase or decrease the Group’s profit after tax, by type of significant commodity and financial liability, by approximately: 2020 RM’000 2019 RM’000 - Palm oil (23,276) (16,662) - LLA liability 262,404 262,960 Net decrease 239,128 246,298 (iii) Finance rate risk The Group’s finance rate risk mainly arises from LLA liability and borrowings issued at variable rates which expose the Group to cash flow finance rate risk. 57 Notes to the Financial Statements For The Financial Year Ended 31 December 2020 Audited Financial Statements 2020