MasterBrand, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk We are exposed to various market risks, including changes in interest rates, foreign currency exchange rates and commodity prices. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We enter into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates. The counterparties are major financial institutions. 41 Table of Contents Interest Rate Risk We had $712.5 million of external variable rate borrowings as of December 31, 2023 . A hypothetical 100 basis point increase in interest rates affecting our external borrowings as of December 31, 2023 would increase our borrowing costs by $7.1 million on a pre-tax basis annually. Foreign Exchange Rate Risk We enter into forward foreign exchange contracts principally to hedge currency fluctuations in transactions denominated in certain foreign currencies, thereby limiting our risk that would otherwise result from changes in exchange rates. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions. The estimated fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. The estimated potential loss under foreign exchange contracts from movement in foreign exchange rates would not have a material impact on our results of operations. Commodity Price Risk We are subject to commodity price volatility caused by weather, supply conditions, geopolitical and economic variables, and other unpredictable external factors. 42 Table of Contents