SANDYPORT HOMEOWNERS ASSOCIATION LIMITED

NOTES TO THE AUDITED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2022

(Expressed in Bahamian Dollars)

21. FINANCIAL RISK MANAGEMENT

Risk is inherent in the Homeowners Association’s activities but is managed through a continuing and pro-active process of identification, measurement and monitoring. The process of risk management is critical to the Homeowners Association’s continuing profitability. The Homeowners Association’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Homeowners Association’s financial performance.

a. Market risk

Market risk is the risk of loss to future earnings, fair values or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in foreign currency exchange rates, equity prices and other market changes.

i. Price risk

Price risk is the risk that the value of an instrument will fluctuate as a result of changes in market prices whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market.

As of December 31, 2022, the Homeowner Association has no significant exposure on price risk.

ii. Currency risk

Currency risk is the risk that the fair value of a financial instrument will fluctuate because of changes in foreign exchange rates. The Homeowners Association may invest in financial instruments denominated in currencies other than Functional Currency

As of December 31, 2022, the Homeowner Association has no significant exposure on currency risk.

iii. Interest rate risk

Interest rate risk is the risk that changes in the market interest rates will reduce the Homeowners Association’s current and future earnings or economic values.

As of December 31, 2022, the Homeowner Association has no significant exposure on interest rate risk.