Page 101 - BTSGroup ONE REPORT 2021/22_EN

BTS Group Holdings Public Company Limited 4.3 Risk Management Review 99
Annual Report 2021/22

Credit Risk Foreign Exchange Rate Risk

Credit risk refers to the risk arising from the debtor or counterparty’s failure Although BTS Group’s main revenue is generated in Thai Baht, we have some
to pay debts or comply with agreed terms. As of 31 March 2022, the Group foreign exchange rate risk, as certain transactions, such as procurement of
had government receivables THB 89.5bn and trade and other receivables rolling stocks, parts, and maintenance directly from overseas manufacturers,
THB 1.1bn. The Company is confident that the government will be able to are made in foreign currencies.
repay all debts. As for trade receivable and other receivables, the Company
regularly monitors the payment status. In addition, there is no concentration As of 31 March 2022, one of our capital expenditure obligations relating to
of receivables due to the Group’s diverse customer base and large number of the operations made in foreign currencies is EUR 4.9mn arising from
customers. Therefore, the Company does not expect to incur significant losses the procurement of the rolling stocks and parts and a yearly expense of EUR
from trade credit. 1.7mn in maintenance cost. However, we have hedged almost all of the risk
by entering into forward contract. Nevertheless, if the Thai Baht significantly
Interest Rate Risk devalues in comparison with foreign currencies in the future, it may result in

The Group has interest bearing debts, namely debentures, bank loans, and bills a slight increase in BTSC’s operational costs.
of exchange, which are all connected to interest rate fluctuation. If the interest
rates increase, our interest expenses will increase for the floating rate borrowing. BTS Group will consider entering into agreements as appropriate to hedge
In addition, BTS Group is exposed to interest rate risk in its investment, the foreign exchange rate risk by assessing the magnitude of the risk and
particularly in the long-term debenture investment, where the investment expenses required to manage it. Moreover, we diversify the risk by investing
value will decrease when the market interest rates increase. We may also lose offshore, which not only increases the rate of return, but also generates revenue in
the opportunity to receive more revenue from the increased interest rates if we had the foreign treasury assets to match foreign liabilities.
invested in long-term debt instruments during a period in which the interest
rates are lower than that in the market. Treasury Management Risk
The Company manages its cash by investing in various financial assets to
To handle the debt level and investment efficiently, BTS Group manages its increase the Group’s income, whereby its policy is to manage these funds
interest rate risk by balancing the fixed and floating rate portion of the borrowing, carefully. However, said investment results depend on several external factors,
as well as regularly monitoring the global and domestic economic situations, such as interest rates, foreign exchange rates, and rates of return. Moreover,
including the trends in interest rates. with our long-term investment policies, certain periods may see gains exceeding
or missing the targets. The Company, therefore, may face risk related to loss of
principal and failure to receive the expected return from treasury management
in some periods.