CFSL Integrated Report 2025

RISK MANAGEMENT

104

Corporate Governance

Statutory Disclosures

Financial

Significant Increase in Credit Risk (‘SICR’) Cim Finance monitors all financial assets that are subject to impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If credit risk has significantly increased, the loss allowance will be measured based on lifetime rather than 12-month ECLs. In making this assessment, Cim Finance considers both quantitative and qualitative information that is reasonable and supportable. This includes historical experience, expert credit assessment, and forward-looking information, ensuring that the process is based on available information without undue cost or effort. At each reporting date, Cim Finance assesses whether the credit risk of a financial asset has increased significantly since its initial recognition, following these steps: (i) A 30-day past due backstop criterion is used as an indicator of Significant Increase in Credit Risk (SICR). (ii) The risk of a default is compared at the reporting date based on the remaining maturity of the asset, relative to the risk of default anticipated when the financial asset was first recognised. (iii) If an asset is considered ‘low risk’ at the reporting date, the Company may assume that it is not subject to SICR. (iv) In addition to the above, other qualitative factors showing early signs of warning are considered. The ECL Calculation ECLs are calculated as unbiased, probability-weighted amounts, determined by evaluating a range of reasonably possible outcomes. This calculation takes into account the time value of money, and considers all reasonable and supportable information, including forward-looking data. The calculation also incorporates how defaulted loans are expected to be recovered, including the probability that the loans will cure (the likelihood that loans will recover) and the value of collateral or the potential amount that may be received from selling the asset. The maximum period for determining credit losses is the contractual life of the financial instrument, unless the Company has the legal right to call it earlier. ECL is derived from the following parameters: PD, LGD and EAD. These parameters are adjusted to reflect forward-looking information as described below:

EXPECTED LOSS

PROBABILITY OF DEFAULT

EXPOSURE AT DEFAULT

LOSS GIVEN DEFAULT

Likelihood of default

Potential severity of losses

Size exposure at default