103 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2022 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Notes to the Consolidated Financial Statements For the year ended March 31, 2022 (Expressed in Barbados dollars) 72 25. Financial Risk Management, continued 25.2 Credit risk, continued The Group’s definition of Significant Increase in Credit Risk (SICR) A significant increase in credit risk (SICR) was defined as a significant change in the estimated default risk over the remaining expected life of the investment. A comparison is made between the default risk as estimated at the reporting date and the default risk at initial recognition of each investment individually or by investment Group. Where an investment is initially deemed to be low credit risk at origination (the purchase date) and continues to be assessed as low credit risk at the reporting date, it is deemed that there has been no significant increase in credit risk. The indicators used to establish whether there has been a significant increase in credit risk is dependent on the nature of the investee; the product type, internal management methods and external market resources. Key external factors for management's consideration in the assessment of credit risk for investments is as follows: 1. A significant change in the value of the collateral supporting the investment can be expected to reduce the investee’s economic incentive to make scheduled contractual payments or to otherwise have an effect on the probability of a default occurring. 2. Actual or forecasted significant investee downgrade in an external credit rating, withdrawal of a credit rating or delisting from a stock exchange 3. Length of time (duration) or the extent to which the fair value of the underlying financial asset or security is less than the amortized cost of the investment at initial recognition 4. An actual or expected significant adverse change in the regulatory, economic, or technological environment of the investee 5. Actual or expected significant change in the operating results of the investee, which can include one or more of the following financial indicators for increased credit risk. (i) Declining revenues or margins (ii) Increasing operating risks (iii) Working capital deficiencies (iv) Decreasing asset quality (v) Increased balance sheet leverage, (vi) Liquidity, management problems or changes in the scope of business or organizational structure (such as the discontinuance of a segment of the business) that results in a significant change in the borrower’s ability to meet its debt obligations.
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