Finance House P.J.S.C.

Condensed consolidated interim financial information

Notes to the condensed consolidated interim financial information (continued) For the three-month period ended 31 March 2023

4 Financial risk management (continued)

(a) Credit risk (continued)

(vi) Exposure to credit risk

The following table contains an analysis of the credit risk exposure of financial assets which are subject to ECL. The gross carrying amount of financials assets below also represents the Group’s maximum exposure to credit risk on these assets.

As at 31 December 2022 (audited) Staging of expected credit losses Stage 1 Stage 2 Stage 3

Notes to the condensed consolidated interim financial information (continued) For the three-month period ended 31 March 2023

4 Financial risk management (continued)

(b) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting its obligations from financial liabilities. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

(c) Market risk

Market risk is the risk that the fair value and future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, price of equity and fixed income securities.

(i) Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments.

The Group is exposed to interest rate risk on its interest bearing assets and liabilities.

The following table demonstrates the sensitivity of the income statement to reasonably possible changes in the interest rates, with all other variables held constant, of the Group’s result for the year.

The sensitivity of the income statement is the effect of the assumed changes in interest rates on the Group’s profit for the year, based on the floating rate financial assets and liabilities held at 31 March 2023

(ii) Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Board of Directors has set limits on positions by currency. Positions are monitored on a daily basis and it is ensured these are maintained within established limits.