CFSL Integrated Report 2025

167

Introduction

Group Overview

Leadership

Strategy & Performance

Explanatory Notes 30 September 2025 4.

FINANCIAL RISK MANAGEMENT (CONTINUED) 4.1 Financial risk factors (continued) (a) Foreign exchange risk (continued)

The sensitivity of the profit before tax with regards to the Group’s and the Company’s financial assets and liabilities and the EURO to Mauritian Rupee, USD to Mauritian Rupee and KES to Mauritian Rupee exchange rate is shown below. If Mauritian Rupee had weakened/strengthened by 8% against EURO, USD and KES respectively, the financial impact would be as follows: GROUP COMPANY EUR MUR M USD MUR M KES MUR M TOTAL EUR MUR M USD MUR M TOTAL Sep-25 Effect on profit before tax (+/-) (7.6) 81.7 (3.7) 70.4 2.1 (17.0) (14.9) Equity (+/-) (6.3) 67.8 (3.1) 58.4 1.7 (14.1) (12.4) Sep-24 Effect on profit before tax (+/-) (3.5) 29.0 (0.6) 24.9 (0.2) (5.6) (5.8) Equity (+/-) (2.9) 24.1 (0.5) 20.7 (0.2) (4.6) (4.8) In 2025 the 8% change in rates used (2024: 3%) above is derived from the average fluctuation in the respective foreign currencies for the last 3 years (2024: 3 years). Due to high volatility in the foreign exchange rates, in 2025 the average fluctuation rate in foreign currencies has been calculated using three years of historic data. (b) Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or fair value of financial instruments. The Group’s and Company’s exposure to interest rate risk (IRR) and positive balances relate primarily to its borrowings and lendings with floating interest rates. The Group and Company mitigate its interest rate risk by having a mixed portfolio of fixed and variable interest bearing lendings and borrowings. For those lendings and borrowings with floating interest rates, the Group and Company ensure that the losses that may be created or reduced following interest margins change are not significant by setting limits on the level of mismatch in interest rate repricing that may be undertaken. The sensitivity of the profit before tax to a reasonably possible change in interest rate of +/- 50 basis points (2024: +/- 72 basis points), with all other variables held constant is shown below. The sensitivity has been based on the net exposure of financial assets and liabilities at the reporting date. These changes are considered to be reasonably possible based on historical observations of current market conditions. GROUP COMPANY (c) Equity price risk Equity price risk is the risk that the fair value of equity securities fluctuates as a result of the changes in the prices of those securities. The Group and Company are not exposed to significant equity price risks as they do not have any significant equity financial assets. (d) Credit risk Credit risk is defined as the potential that a borrower or counterparty will fail to meet its obligations in accordance with agreed terms. Credit Risk at the Group and Company arises mainly from various forms of lending covering all the credit portfolios; credit facilities, money lending, credit cards, factoring, and leasing as well as deposits and balances held with banks. The effective management of credit risk is a critical component of risk management and essential to the long term success of the organization. The Risk Management Committee has oversight of the management of the credit risk framework. Sep-25 MUR m Sep-24 MUR m Sep-25 MUR m Sep-24 MUR m Effect on profit before tax (+/-) 9.3 7.7 9.3 7.7