- 61 - 38.2.2 Interest rate risk management The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite; ensuring the most cost-effective hedging strategies are applied. The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. Interest rate sensitivity analysis The sensitivity analysis below have been determined based on the exposure to interest rates for both financial derivatives and non-financial derivatives at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole year. The Group’s sensitivity to 1% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 1% higher/lower and all other variables were held constant, the Group’s: - Profit or loss for the year ended December 31, 2021 would decrease/increase by Baht 261 million (2020 : decrease/increase by Baht 311 million). This is mainly attributable to the Group’s exposure to interest rates on its floating rate borrowing. Interest rate swap contracts Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The detail various information regarding interest rate swap contracts outstanding at the end of the reporting period, interest rate swap contract assets and liabilities are included in Note 22. Interest rate swap contracts will be settled every month. The floating rate on the interest rate swap contracts is 1-month LIBOR plus 1. 25%. The Group will settle the difference between fixed and floating rate on a net basis. 38.2.3 Commodity price risk Commodity price risk in the Group primarily arises from price fluctuations and the availability of petroleum products. The Group enters into derivative transactions to limit these risks. Hedging activities are evaluated regularly to align with Group expectations about the price changes and defined risk appetite; ensuring the most cost-effective hedging strategies are applied. Commodity price sensitivity analysis If the commodity price had been increased/(decreased) by 1 USD per barrel in December 2021, profit (loss) after tax would increase/(decrease) by Baht 125 million (December 2020 : increase/(decrease) by Baht 71 million). 363 NOTES TO THE FINANCIAL STATEMENTS IRPC PUBLIC COMPANY LIMITED
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