1

A STUDY ON ASSETS AND LIABILITIES MANAGEMENT

(WITH REFERENCE TO LEO LABS IT SOLUTIONS)
A Project report submitted to Jawaharlal Nehru Technological University, Hyderabad,
for the award of degree
MASTER OF BUSINESS ADMINISTRATION


By
P.KISHOR
Reg. No. 10241E0023

Under the Guidance of
Prof. DR. PB APPA RAO


Department of Management Studies
Gokaraju Rangaraju Institute of Engineering & Technology
(Affiliated to Jawaharlal Technological University, Hyderabad)
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Hyderabad
2010-2012




CERTIFICATE

This is to certify that the project entitled A Study on Assets and Liabilities
management has been submitted by Mr. P.KISHOR (Reg. No. 10241E023) in
partial fulfillment of the requirements for the award of Master of Business
Administration from Jawaharlal Nehru Technological University, Hyderabad. The
results embodied in the project have not been submitted to any other University or
Institution for the award of any Degree or Diploma.




Sri. Dr. PB. Appa Rao Sri. KVS Raju
Internal Guide Professor & HOD
Professor Department of management Studies
Department of Management Studies GRIET
GRIET



Mr. S. Ravindra Chary
(Project Coordinator)
Associate Professor
Department of Management Studies
GRIET








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DECLARATION



I hereby declare that the project entitled A study on Assets and Liabilities
management a at t L LE EO O L LA AB BS S I IT T S SO OL LU UT TI IO ON NS S submitted in partial fulfillment of the
requirements for award of the degree of MBA at Gokaraju Rangaraju Institute of
Engineering and Technology, affiliated to Jawaharlal Nehru Technological University,
Hyderabad, is an authentic work and has not been submitted to any other
University/Institute for award of any degree/diploma.







P.KISHOR
(10241E0023)
MBA, GRIET
HYDERABAD









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ACKNOWLEDGEMENT



Firstly I would like to express our immense gratitude towards our institution Gokaraju
Rangaraju Institute of Engineering & Technology, which created a great platform to attain
profound technical skills in the field of MBA, thereby fulfilling our most cherished goal.
I would thank all the finance department of Leo Labs specially Mr.CH. JAGADEESH
Asst Manager Finance for guiding me and helping me in successful completion of the project

I am very much thankful to our Prof. Dr. PB. APPA RAO (Internal Guide) sir for
extending his cooperation in doing this project.

I am also thankful to our project coordinator Prof. S. RAVINDRA CHARY for
extending his cooperation in completion of Project..

I convey my thanks to my beloved parents and my faculty who helped me directly or
indirectly in bringing this project successfully.



P. KISHOR
(10241E0023)




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INDEX
S.No: Contents Page No.

Chapter-1 1-9
Introduction
Need of the Study
Scope of the study
Objectives of the Study
Methodology of the Study
Limitations of the Study
Chapter-2 10-36
Industry Profile
Company Profile
Chapter-3 37-59
Review of Literature
Chapter-4 60-70
Data Analysis And Interpretation
Chapter-5 71-74
Findings
Suggestions
Conclusion
Chapter-6 75-76
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Annexure
Bibliography



CHAPTER-I
INTRODUCTION
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Introduction:
Asset Liability Management (ALM) is a strategic approach of managing the balance
sheet dynamics in such a way that the net earnings are maximized. This approach is concerned
with management of net interest margin to ensure that its level and riskiness are compatible with
the risk return objectives.
If one has to define Asset and Liability management without going into detail about its
need and utility, it can be defined as simply management of money which carries value and
can change its shape very quickly and has an ability to come back to its original shape with or
without an additional growth. The art of proper management of healthy money is ASSET AND
Liability Management (ALM)
The Liberalization measures initiated in the country resulted in revolutionary changes in
the sector. There was a shift in the policy approach from the traditionally administered market
regime to a free market driven regime. This has put pressure on the earning capacity of co-
operative, which forced them to foray into new operational areas thereby exposing themselves to
new risks. As major part of funds at the disposal from outside sources, the management are
concerned about RISK arising out of shrinkage in the value of asset, and managing such risks
became critically important to them. Although co-operatives are able to mobilize deposits, major
portions of it are high cost fixed deposits. Maturities of these fixed deposits were not properly
matched with the maturities of assets created out of them. The tool called ASSET AND
LIABILITY MANAGEMENT provides a better solution for this.

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Asset Liability Management (ALM) is a portfolio management of assets and liability of
an organization. This is a method of matching various assets with liabilities on the
basis of expected rates of return and expected maturity pattern
In the context of ALM is defined as a process of adjusting liability to meet loan
demands, liquidity needs and safety requirements. This will result in optimum value of the same
time reducing the risks faced by them and managing the different types of risks by keeping it
within acceptable levels.
RBI Revises Asset Liability Management Guidelines (February 6/2012)
In the era of changing interest rates, Reserve Bank of India (RBI) has now revised its
Asset Liability Management guidelines. Banks have now been asked to calculate modified
duration of assets (loans) and liabilities (deposits) and duration of equity.
This was stated by the executive director of RBI, V K Sharma, and here today. He said
that this concept gives banks a single number indicating the impact of a 1 per cent change of
interest rate on its capital, captures the interest rate risk, and can thus help them move forward
towards assessment of risk based capital. This approach will be a graduation from the earlier
approach, which led to a mismatch between the assets and liabilities.
The ED said that RBI has been laying emphasis that banks should maintain a more
realistic balance sheet by giving a true picture of their non performing assets (NPAs), and they
should not be deleted to show huge profits. Though the banking system in India has strong risk
management architecture, initiatives have to be taken at the bank specific level as well as broader
systematic level. He also emphasized on the need for sophisticated credit-scoring models for
measuring the credit risks of commercial and industrial portfolios.
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Emphasizing on a need for an effective control system to manage risks, he said that the
implementation of BASEL II norms by commercial banks should not be delayed. He said that the
banks should have a robust stress testing process for assessment of capital adequacy in wake of
economic downturns, industrial downturns, market risk events and sudden shifts in liquidity
conditions. Stress tests should enable the banks to assess risks more accurately and facilitate
planning for appropriate capital requirements.
Sharma spoke at length about the need to extend the framework of integrated risk
management to group-wide level, especially among financial conglomerates. He said that RBI
has already put in place a framework for oversight of financial conglomerates, along with SEBI
and IRDA. He also said that at the systematic level efforts are being made to create an enabling
environment for all market participants in terms of regulation, infrastructure and instruments.
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Need of the Study:
Need of the study is to concentrates on the growth and performance of Leo Labs IT
Solutions and to calculate the growth and performance by using asset and liability management
and to know the management of nonperforming assets.
To know financial position of Leo Labs IT Solutions
To analyze existing situation of Leo Labs IT Solutions
To improve the performance of Leo Labs IT Solutions
To analyze competition between Leo Labs IT Solutions with other cooperatives.

Scope of the Study:
In this study the analysis based on ratios to know asset and liabilities management under
Leo Labs IT Solutions and to analyze the growth and performance of Leo Labs IT Solutions
by using the calculations under asset and liability management based on ratio.
Ratio analysis
Comparative statement
Common size balance sheet.
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Objectives of the Study:
To study the concept of Asset & Liablity Management in Leo Labs IT Solutions
To study the process of Cash Inflows and Outflows in Leo Labs IT Solutions
To study the Risk Management under Leo Labs IT Solutions
To study the Reserves Cycle of ALM under Leo Labs IT Solutions
To study Functions and Objectives of ALM committee.
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Methodology:
The study of ALM Management is based on two factors.
1. Primary data collection.
2. Secondary data collection
Primary Data Collection:
The sources of primary data were
The chief manager ALM cell
Department Sr. manager financing & Accounting
System manager- ALM cell
Gathering the information from other managers and other officials of the organization.
Secondary Data Collection:
Collected from books regarding journal, and management containing relevant
information about ALM and Other main sources were
Annual report of the Leo Labs IT Solutions
Published report of the Leo Labs IT Solutions
RBI guidelines for ALM.



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Limitations of the Study:
1. This subject is based on past data of Leo Labs IT Solutions
2. The analysis is based on structural liquidity statement and gap analysis.
3. The study is mainly based on secondary data.
4. The results are approximated, as no accurate data is Available.
5. Study takes into consideration only LTP and issue prices and their difference for
concluding whether an issue is overpriced or under priced leaving other.
6. The study is based on the issues that are listed on NSE only.
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CHAPTER-II
A PROFILE OF THE INDUSTRY AND THE COMPANY
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Company Profile:
Leo Labs IT Solutions Pvt. Ltd. has built a reputation of delivering software and business
management solutions that provide measurable results. It has been recognized as one of the
fastest growing companies in Hyderabad, India. Leo Labs growth can be attributed to the
company's focus on quality, consistency, and long-term vision. While many Software companies
chased the market to find revenue in the latest fads, Leo Labs IT Solutions remained focused on
delivering proven business solutions to its clients
Utilizing our project management methodology that has produced esteemed results for
our clients, we are strategically establishing new offices in markets that offer opportunity. This
methodology, combined with the extraordinary talent of the local managing directors and
exceptional consultants with their years of experience, will develop offices to serve our clients
and partners. In order to thrive in an interconnected economy, the service offerings by Leo Labs
IT Solutions meet the demands of an ever-changing business environment. Leo Labs delivers
fresh solutions with seasoned professional developers and consultants who have one singular
focus: Ensure that everything we do delivers value to our clients and moves their businesses
forward giving them the edge in the demanding business world.
Vision:
We provide our customers with the highest levels of service, quality, and efficiency. The
enduring and personal relationships we hold with our clients, gives us the advantage of a loyal,
well-established client and partnership base. We offer the assurance that company needs will be
met now and in the future.
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Mission:
To be globally recognized as a provider of a trusted, reliable resource to quality Information
Technology (IT) solutions.
To build worldwide partnerships for success.
To give the clients a competitive edge.
To enhance the operational efficiency and financial advantage to clients.
Solutions:
Business Strategy
E-Business/Web Services
Enterprise Application
Integration
Integrated Marketing
It Strategy Development
Process Development
Business Strategy:
Business Consulting:
The greatest accomplishments begin with an architect plan. We believe that Leo Labs IT
Solutions is the advisor that the company needs most as you begin to conceptualize the business
road map. Our business consulting team is the cohesive mortar that unites our various
disciplines. By focusing on company's strategic objectives, we are able to design, develop, and
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implement the solutions that will produce measurable change across the enterprise. As the
foundation of Leo Labs IT Solutions, this business-centric philosophy permeates our various
discipline leaders. Whether a developer or a designer, the goal of producing custom business
solutions is paramount.
Defining Directions:
Our ability to offer guidance throughout the highest levels of leadership is cultivated by
our ability to architect and execute solutions that matter most. This focus on sound strategic
direction provides a high-level road map that can manage and expand channels, enhance
revenue, and penetrate markets that may have previously been inaccessible. Our knowledge and
use of business intelligence tools allows our clients to make calculated decisions based on real-
time data, thus providing accurate and effective results
Forming a Structure:
Our skill in analyzing company's internal structure enables Leo Labs IT Solutions to
enhance business processes, operational efficiencies and manage or reduce overall costs. By
optimizing supply chain through supplier collaboration and rationalization we can improve the
relationships that support business.
Extending Relationship:
By helping to orientate leadership direction and formulate operational practices, Leo Labs
IT Solutions can also effectively refine how company goes to market. By improving the ways in
which the company deploy their sales force, manage traditional customer relationships and build
an integrated marketing and communications plan, we can help the craft every touch point
between the company and customers.
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E-Business/Web Services:
E-Business is much more than buying and selling over the Web. In the simplest sense, it
is the use of Internet technologies to improve core business processes. And, while technology
makes e-business possible, e-business isn't about technology. It's about connecting core business
systems and processes to customers, suppliers, and employees24 hours a day, 7 days a week.
E-Business?
E-Business can help companies meet today's business challenges head-on. Whether it's
increasing revenue or decreasing costs, reaching new customers or better serving existing ones, a
solid e-business infrastructure provides the foundation to deliver true value to stakeholders.
Important reasons to become an e-business include the following:
Increase revenue
Decrease costs
Improve employee efficiency
Expand market reach
Strengthen business relationships
Improve customer satisfaction
At Leo Labs IT Solutions, we know that the success of our company depends on our
ability to provide world-class, e-business solutions with real business value to our clients. We
understand the business impact of e-business. Our experts have helped many companies leverage
the Internet with the following solutions:
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E-commerceallows companies to buy and sell products and services online.
Business intelligenceallows companies to acquire data about their customers to provide
better service. Customer relationship managementprovides the ability to support and retain
profitable customers.
Supply chain managementstreamlines end-to-end processes associated with the flow of
products.
Enterprise Application Integration:
Leo Labs IT Solutions development team is designed to partner with our clients to
address many business critical issues and objectives. Leo Labs IT Solutions knows how to use
state-of-the-art technologies to provide targeted, world-class integration solutions that address
unique business needs.
The Need:
Are the companies getting the most out of the Web and core business-system
implementations? Are these applications connected throughout the organization? Does the
company question whether or not the integration between applications is able to support the
company changing business process needs? Do your business associates have access to accurate,
relevant, and timely information for critical decision-making?
With ever-increasing pressure to be as efficient as possible, Enterprise Application
Integration is becoming vital to organizations of every size. EAI is used to interconnect existing
information systems, prior technology investments, and business partners systems and data. As
enterprises grow and recognize the need for their information to be shared between systems,
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companies are investing in EAI to streamline processes and keep disparate elements of the
enterprise interconnected.
The Solution:
SAP--This solution provides end-to-end functionality for business analytics, financials,
human capital management, operations, and corporate services -- and allows you to upgrade to
the full range of SAP solutions. Enterprise Resource Planning [ERP]--Seamless ERP
Implementations and Upgrades, Efficient Support and Quicker Return on Investment (ROI) on
their Enterprise Applications is what every organization dreams of. Leo Labs ERP team has over
50 highly qualified Consultants, offering a unique blend of business vertical knowledge and
technical expertise that meets its customers' Enterprise Application requirements from a Short-
Term Goal Realization perspective, as well as a Long-Term Total Cost Operations Reduction
Leo Labs solutions are implemented using a framework that enables your organization to
integrate and extend your business applications across and beyond the enterprise. Our solutions
address specific business challenges such as:
Finding cost savings by integrating business applications and processes with flexible
and scalable long-term solutions
Maximizing the return-on-investment from the Web site and core business system
implementations by creating tight inter-application integration
Having real-time access to more accurate and timely business data to make better
decisions, reduce cycle times and increase operational efficiencies
Selecting the right technical architectures and vendor products to maximize
efficiencies and compliment your existing and future state enterprise architecture
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Creating integration between co-existing business units as well as for the
assimilation of mergers and acquisitions
Linking to and collaborating with a variety of customers and partners with different
needs or standards directly or through market exchanges
Our Experience:
Leo Labs IT Solutions development team continues to deliver solutions across a wide
range of industries and functional areas. Our solutions are aided by our strong partnerships with
leading industry vendors. As a result, our consultants are well versed in the latest trends, tools
and technologies best suited for the particular business and technical challenges.
The Advantage:
Leo Labs IT Solutions focus is on delivering solutions that will be effective in the unique
environment. Our experience and vendor neutral position allows us to choose the best mix of
technologies for the particular environment. May organization has invested significant time,
effort, and financial resources into the applications and information systems that run business.
Leo Labs IT Solutions, solutions are designed to minimize these investments by identifying and
simplifying the processes that will provide secure and timely access to your companys
information assetsgiving the organization a strong competitive advantage.
Integrated Marketing:
Successful Integrated Marketing solutions take three key elements in order to produce
value: solid strategy, quality design, and measurability.

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Solid Strategy:
By understanding competitive landscapes, identifying audiences, and estimating the
return on investment, Leo Labs IT Solutions can help out making intelligent marketing decisions
that provide maximum returns. We analyze the company business objectives and determine a
path of communication that will reach the consumer or client base on a more consistent basis.
Quality Design:
Integrated Marketing utilizes a variety of media and channels. It employs designers that
understand these mediums and can translate their designs into effective communications. Leo
Labs designers have the expertise to match visual design with the appropriate language and
elements, essential in improving response rates and reaching near to intended audience.
Measurability:
Leo Labs IT Solutions specializes in business intelligence tools that can analyze data,
response rates, and demographics. By having access to this information in real time, we can
effectively tailor communications to increase response rates, measure return on investment, and
make Intel suited for your business objectives. Leo Labs IT Solutions can enable the company to
take advantage of the technology and talent that is available to drive consumer demand, sales,
and the message of the organization.
ITS Strategy Development:
Over the past few years the role of technology in business has become a critical success
factor. Many organizations leverage information technology to help them deliver their products
and services. But few organizations truly realize the business benefits that can be achieved from
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an effective technology strategy. The rapid pace of change in technology provides companies
with new, cost-effective mechanisms to communicate with their customers, suppliers,
employees, and key business partners. Properly harnessed, technology initiatives can enrich
customer relationships, shorten supply chains, and streamline a number of internal processes so
that a true return on investment is realized. The first step is to create alignment and consensus
within the organization and build an action plan around those initiatives that will deliver the
highest return.
Strategic Planning Solutions:
Leo Labs IT Solutions Strategic solutions leverage a proven methodology to help our
clients fundamentally align and leverage technology in order to achieve enterprise business
objectives. We devise these strategies by examining the current infrastructure, IT organization,
business processes, organizational objectives, and key stakeholders. Then we align technology
solutions in a way that ties these stakeholders to the business systems and processes within the
organization.
Strategic Planning Service Features
Aligns technology infrastructure and initiatives with high-priority business
processes and organizational objectives
Focuses on the needs of the key stakeholders (customers, suppliers, employees) and
not on the limitations of technology.
Provides qualitative and quantitative measures of the success of the strategy or
business continuity plan.
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Creates alignment, consensus, and accountability for the prioritized initiatives
among executive leadership and line of business management.
Our strategic planning solutions can be used to help the organization during its annual
planning, or throughout the year as industry and market trends demand. Strategic planning may
be necessary in the following situations:
When a competitive advantage is needed to demonstrate quality of service
When the organization seeks to expand while maintaining existing operational
infrastructure (capital and human resources)
When audits have identified gaps or weaknesses in business or IT capability
When structural organizational changes occur (acquisition, merger, or divestiture)
When no business continuity, disaster recovery, or emergency management plan
exists
Process Development:
Leo Labs Business Process Improvement solutions are designed to help the company to
streamline the processes that are critical to managing business.Organizations need to optimize
the business process, but seldom do. Thats where Leo Labs Business Process Improvement
solutions come in.Using our proven methodology and toolsets, we deliver key business results in
a timely fashion. We help to achieve improved customer service, cost reductions, and capacity
expansion.


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The Need:
Are the company key performance metrics out of alignment with the competitors? Are
the customers reducing their lead times? And do the company employees continually executive a
process that is loaded with no valueadd tasks?These are the questions that many
organizations are faced with on a daily basis.The reality is that most organizations could be
handling these processes much more efficiently, providing significant business value and
competitive advantage.
The Solution:
Leo Labs IT Solutions Business Process Improvement solutions are designed to position
the organization to take advantage of the opportunities and quickly address the challenges. Our
solutions are able to seamlessly cross the department and operational boundaries within the
organization. Our focus is to ensure that participants within a process are all working off the
same vision and driving toward the same goals.Leo Labs IT Solutions Business Process
Improvement solutions are customized to your specific needs. In addition to delivering the
customer business metrics, we leverage our experience in order to rapidly deliver best practices
that have proven to be important to many of the organizations that we have worked with.
Our Experience:
Leo Labs IT Solutions Business Process Improvement team has delivered solutions
across a wide range of industries. Our consultants are versed in the latest trends, tools, and
technologies being deployed as part of these solutions. Having participated in numerous
Business Process Improvement engagements
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Our consultants are well equipped to architect and deploy the solution most suited for
your particular business. Our solutions are aided by our strong focus on economic and financial
analysis.
The Advantage:
Leo Labs IT Solutions has an entire practice dedicated to delivering Business Process
Improvement solutions. Our focus is on delivering solutions that will be effective in the unique
environment. We believe that our vendor focus on economic and financial analysis is a key
differentiator from our competition.Many Organizations has invested a lot of time, effort, and
financial resources into the applications and information systems that run your business. Leo
Labs IT Solutions Business Process Improvement solutions are designed to minimize those
investments by identifying and simplifying the processes that support the company, giving the
organization a strong competitive advantage.
Services:
Product Development:
Leo Labs IT Solutions Pvt.Ltd. fosters rapid, framework and component-based
development approach to build mission critical, off-the-shelf products and applications. We have
developed products and solutions on leading technologies with a strong orientation toward
standards-driven architecture. Our process driven approach forms the foundation for engaging
with customers, to build high quality, cost-effective products and applications. Over and above,
we lay our thrust in understanding customer needs to devise optimum design and development
strategies that would enable them to market their product quickly. Leo Labs IT Solutions has the
concept of Framework and "Component Based Development" for product / application
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development and reusability and provides cost-effective services to our customers for outsourced
product development.
Product Maintainance And Support:
Leo Labs IT Solutions offers maintenance and support services to the customers as part
of its service offering. Leo Labs has a clearly laid down methodology for such maintenance
engagements. Over the years we have gained substantial experience in providing 24/7
maintenance support remotely, to the customers. Leo Labs has the expertise and ability to meet
the needs and expectations to support the applications.
Onsite Maintainence:
In this approach, the Leo Labs team at onsite will carry out all the maintenance and
support for the application. However the offshore team based at Leo Labs development center
will be extending the support for the onsite team on any technical issues that they may have.
They act as a backup and in the event of any emergency; can immediately act as a replacement.
Offshore / Remote Maintainence:
The remote maintenance approach adopted by Leo Labs IT Solutions Pvt. Ltd. to carry
out the maintenance is explained below. Receiving the issue: The onsite technical support team
receives the issue from client either through any of the following media like e-mail, telephone,
mobile phone or instant messenger services. A ticket number generated would help the offsite
team identify each issue. Study and Analysis: Once the problem Ticket issue is received, the
Onsite technical team makes a careful study of the issue and analyzes its complexity.
Estimation: After a thorough analysis the work estimation is made and it is placed before the
client through an offsite support Manager. Based on the estimated time and priority, the issue is
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then scheduled to be resolved either by the onsite team or by the offshore team. Scheduling:
Identify the best suitable team member(s) for solving the issue and assign the tasks to that
particular resource(s). Solution: The assigned team member(s) provides the solution as specified
in the given task document in a scheduled time adhering to the quality standards, he also
provides a standard document describing the work done.Testing: Test the changed code as per
the Maintenance Manual. Update the documentation as required Log Maintenance: Logs will be
maintained for future use by the offsite as well as offshore team for all the support issues that
have come up.
Application Development:
With increasing demands, enterprises worldwide are finding it difficult to implement, and
support new applications, while at the same time, maintaining and upgrading their existing
systems. To overcome the situation, companies must seek to expand development capacity,
accelerate time-to-market, and build flexible distributed delivery models to negotiate risk. There
are benefits in building software to improve existing business processes rather than changing
proven procedures in order of work within the constraints of off-the-shelf applications. Leo Labs
addresses these issues and will help you to remain in step with and ahead of your competition by
continuously improving your information technology-based business solutions. We remain
focused on developing the best solution to respond to each client's individual business needs.
Through our advanced consultative approach, Leo Labs assists in clearly defining organizational
goals and determining where the current systems meet these goals, where they fail, and how they
can be improved through our custom applications solutions. Our experienced team will work on
the project from its conceptualization through and beyond its completion and implementation.
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Our focus areas include extranet, intranet, business-to-business, e-commerce solutions, software,
database and other industry applications.
Our Services in these Areas are Focused On:
Application Development - This includes web based, client/server application
development and enhancements to legacy applications.
Migration and Customization - This includes version Upgrade Services, Database
migration, Re-engineering, Functionality upgrades and Porting.
Implementation Support - Routine Maintenance and Functional Enhancements.
Development and Testing - Component Development and Unit Testing, System and
Integration testing
Application Maintenance:
Leo Labs IT Solutions provides comprehensive software application maintenance
services for medium to large enterprises. Services range from undertaking maintenance of
existing applications to adding new functionality. Deep experience in understanding and
maintaining large applications coupled with an expertise in new technologies help to not only
prolong the life of existing applications but also infuse fresh blood into the system. A team of
dedicated software engineers are available round the clock both onsite and offsite to handle all
maintenance related issues from defect fixing to adding new products and functionality.


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Application Maintenance Deals With:
Promptly fixing software problems that cause the system to be non-operative or to
perform incorrectly
Implementing changes, improvements, and enhancements to the system.
Interaction:
Leo Labs IT Solutions has rich experience in successfully executing large IT outsourcing
projects with well-established Infrastructure. Leo Labs Interactions, the BPO arm of Leo Labs IT
Solutions Pvt. Ltd. Aims about reducing the operational costs for its Clients by improving the
outsourced processes and increasing their productivity. The strong parentage of Leo Labs IT
Solutions provides the right mix of Infrastructure, People and Processes to the clients. The
partnership offers technical expertise coupled with global call center expertise. To keep pace
with today's economic environment, organizations need to focus on their core competence.
The easiest way of doing this is to partner with a service provider like Leo Labs
Interactions, who understands the company business and solves non-core, yet critical business
processes. Leo Labs Interactions interest lies in a long-term partnership addressing all aspects of
the outsourcing requirements from clients. Leo Labs Interactions gives the very best in bringing
cost efficiency with quality processes, round-the-clock operations, state-of-the-art infrastructure
and a committed people force.
It offers Industry-specific services to customers. For instance, in the Insurance and
Healthcare sector, it addresses Claims Processing, Policy Issuance, Premium Accounting, etc. It
also offers Front Office services like Contact Centers for Customer Service. It provides Product
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Support & Technical Help Desk services as well as Back-Office Processes in the areas of
Accounting, HR and other Transaction Intensive activities.
Business Process Outsourcing:
Business Process Outsourcing (BPO) has changed the way the world does business, and
this trend is only likely to accelerate. BPO is quickly emerging as a key enabler of all high
performing organizations. More and more businesses and governmental leaders-cross industry,
organizational size and geography are turning to BPO to help them elevate their organizations
performance.Through the right mix of business process improvement, labor arbitrage and
technology enhancements, BPO is aimed at reducing cost, increasing service levels and thus
improving the enterprise value of the business processes. Blending qualified workforce and
faster adoption of well-defined business processes leads to higher productivity gains without
compromising on quality. The availability of cost effective skilled resources - that is well
educated and able to converse in English, well-developed communication infrastructure and
software sector as well as an appropriate time difference with other countries, help in making
India a favorite destination for the BPO industry.
R&D Outsourcing:
The story of Research and Development Outsourcing in IT in India dates back to 1985-86
when Texas Instruments (TI) established its development center in Bangalore. Today, the R&D
services outsourced to Indian companies include product development, embedded technology,
software engineering, encryption and network security and chip design services. After IT
services (ITS) and IT-enabled services (ITES), a new opportunity for Indian companies is the
arena of related product and technology services for independent software vendors (ISVs).
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The factors driving the increasing momentum of R&D off-shoring / outsourcing industry are:
Availability of highly skilled manpower
Cost-effectiveness
Proximity to fast-growing Asian markets
Benefit of follow-the-sun schedules
Information security solutions
Organizations worldwide have begun focusing on outsourcing activities to ease the
pressures of financial performance, quality, productivity and time-to-market. To increase the
competitiveness of their businesses, organizations have been laying greater emphasis on R&D
Outsourcing to leverage internal resources and capabilities with external sources of research and
technology.
Our Services Help Customers To:
Avail cost-effective Offshore Development Service
Protect their Intellectual Property Rights (IPR) by following established
processes for secure communication and protection
Build resource pools consisting of focused R&D teams for new initiatives in
specific technologies
Reduce development time and effort
Minimize risks and improve product quality.

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Technology Excellence Group (TEG):
Leo labs have established structured Technology Excellence Groups (TEG) to foster
innovation. The following Technology Excellency Groups have been formed:
.NET
J2EE
Web Services
Legacy
Security
Embedded Systems
Mobile
Application Servers
Database
Knowledge
Our Value Proposition:
Leo labs Strategic Partnership with the client would help the client leverage our
Technology labs and Development facilities, quickly build resource pools
consisting of focused R & D teams for new initiatives in specific technologies
Our dedicated Technology labs for the client's R&D division acts as Virtual
Extension in terms of Vision, People, and Infrastructure
34

Protect client's Intellectual Property Rights (IPR) by following established
processes for secure communication and protection.
Our strong focus is towards the quality of solution we deliver and support we
offer to our client.
Our extensive skills in developing re-usable components, frameworks and
expertise in executing complex solutions gives advantage of high-quality, cost-
effective development to our customers.
We make sure that our work is towards minimizing the business risks and
speeding up the entry of new products in the market.
Call Center Services:
Our focus has been to continually find new and better ways to help our clients make
profitable connections with their customers. Whether you need messaging or answering service,
inbound call center services, outbound call center services, email support and online chat, we can
help out to make the most of every contact
Inbound Teleservices:
Our call handling and inbound telemarketing services for business-to-business and
business-to-consumer campaigns will help drive customer acquisition, increase customer
retention, improve sales and rapidly expand your markets. Our inbound supports include:
Help Desk: 24 Hours /Day, 365 Days /Year Technical Support Requests for Maintenance
Support Requests for Maintenance Support Inbound Telemarketing / Up-Selling & Cross-Selling
Requests for Samples Order Status: Customers can check on the status of their order at any time
35

Dealer Locate: Callers are given information on the store or dealer nearest to them. Ticketing
Sales Subscriptions Fundraising Advertising Co-Op Claim Processing Rebate Processing
Insurance Claims Processing Product Recall Management Customized Interactive Voice
Services Overflow, Off-Hour and Weekend Call Handling Fax on Demand: An access channel
for those customers who need documented answers or written confirmation
Outbound Teleservices:
Our tele-professionals help out to turn the company prospects into customers, and then
our customers into advocates. We focus on building a relationship that lasts by using a
personalized approach that provides the value addition necessary to maintain and grow your
client base. Our outbound capabilities include:Telemarketing and Sales: We use predictive
dialing to connect to customers. Our tele-sales techniques also include: Reactivation:
Approaching your 'expired' customers with the right offer Targeting: Isolating key decision-
makers and discovering their budgets before you spend resources on more costly mail or sales
calls New Movers: Tapping people who have just moved residence, for example, and asking
them to pre-register for your service or organization Renewals: for publishing and finance,
telemarketing is by far the most efficient way to secure repeat buyers Aftermarket Sales:
Contacting new customers and securing additional sales, even when other products are
seemingly unrelated.
36

Clients:






BG Group is a leading player in
the global energy market and is a
dynamic growing business with
operations in 20 countries over
five continents.
Onetel is part of the Centrica Group,
which also operates under the British
Gas, Scottish Gas and Dyno brands in
the UK. Onetel is the UK 's largest
integrated communications service
provider
Viasat AB's satellite-TV-
platform covers 15 countries
in Europe and reaches more
than 50 million viewers.


Soft Service is committed to
innovation designed to provide
the clients with significant gains
in the quality of their systems.
Scarlet info systems is an Offshore
Outsourcing Web Development
Company and E-commerce Software
Development firm offering IT
Outsourcing.
LogicSoftware, Inc.is
specialized in the
development of custom
software applications and
offshore software
outsourcing services.

Richard Daley
Silicon Valley is a leading
Global IT Powerhouse based in
India focused in developing
online web applications.
Qulix Systems is an offshore software
development company from Belarus,
offering an unbeatable combination of
custom software development
solutions, systems reengineering,
software testing and QA services.
Richard Daley Associates
(RDA) provides software
development, web
development, software
training and software
consulting to its clients.


Alsoft Solutions,Inc a global IT
Services firm specializing in end-
to-end Solutions and Product
Development
StarSoft Development Labs is one of
the fastest growing software
outsourcing service providers in Russia
and Eastern Europe.
Agitar was founded in June
2002 and is working on test
automation research and
development since 1995.
37



Vested Development Inc. (VDI)
is a leading global outsourcing
provider of offshore software
development services.
Eurostudio Web Solutions is an
offshore web design and development
company based in Novosibirsk, Russia.
We offer our customers a full range of
IT services.


38

Resources:




Stylus Inc was launched out of a
2 bedroom house in 1999 --
probably the reason why our
employees, clients and vendors
feel at home when they visit us in
our current 3 storey office today.
Inkorus Group of Companies have
24x7 operations and have a reach to
the Global offshore outsourcing
marketplace through their offshore
software development centers across
North America, Asia-Pacific, EU and
Middle East regions.
Brain Pulse is a premium managed web
hosting company in India, providing
web hosting solutions for Linux and
Windows platforms.






CodeLance brings together those
in need of
Custom software envelopment
with freelance programmers from
all over the world. How does it
work?
Binary Semantics Driven by the
vision to provide customer centric
and cost effective solutions to
organizations, we have grown into a
company with wide range of service
offerings to meet all your
outsourcing needs and concerns.
Cranberry Offshore web design and
development company in Delhi India for
web design, website development, e-
commerce website, corporate website
design, website maintenance and flash
based web design services.





E-infinity solutions
Is a leading provider of
information technology service to
business and government
worldwide founded in 2003
infinity has the experience
business operations.
Gateway TechnoLabs
Is a Software Outsourcing &
Offshore Software Services
Company specializing in the business
of providing services to its clients
globally.
Developers.net Now you have a
solution. Track-It! Standard. Its the
perfect solution for tracking and
managing of your IT assets and end-
users help requests. It helps increase the
level of IT support.









39







Genisyl offers website
development, designing &
packaged software, search engine
optimization for websites &
multimedia & corporate
presentations.
IT Outsourcing Guide maintains a
detailed list of IT outsourcing
companies around the world offering
offshore software & product
development solutions & outsourcing
and more.
Web Design & Development is
identical to offshore outsourcing
services in India, offering world class
offshore web design, software & e-
commerce development.
Software Consultant is a leading
offshore IT consultant, Offer IT
consultancy services that are aimed at
helping organizations in the long run as
well as the short run.



Pegasus info corp.: Pegasus
info corp was formed with a
single powerful belief among its
two founders that the Internet
could enhance and transform
businesses in an amazing way.
This belief continues to drive us
towards our mission of helping
discover and implement the best
online strategy for businesses,
institutions and professionals.
Net creative mind :Custom web site
design company NetCreativeMind
provides offshore custom website
design and development services at
affordable prices, offering clients an
array of quality website development
services like Business website
development, custom web page
designs, software development etc.
ETNL: ETNL is a premium managed
search engine optimization outsourcing
company in India, providing web design
services, website promotion services and
web hosting solutions for Linux and
Windows platforms. Our head office is
at Kochi (Cochin), Kerala one of the
emerging IT hubs in the world.
Outsourcing market research:
Consystent is an offshore outsourcing
company in India
offering data entry, document
management outsource & financial
services.







Midas: is an offshore web
development company in India
offering complete web site
designing, custom web site
development, ecommerce & seo
solutions.
Conceptinfoway: provides offshore
outsourcing services for software
development, web development,
search engine optimization, web
hosting service in India, uk, usa and
Australia.
Word to PDF Converter: You can
convert any word document into a PDF
file with DocSmartz word to PDF
Converter. DocSmartz converts word
documents into PDF documents
retaining layout, text, and images.

40




Computer Forums : Just make
your profile, get logged in and
enter the widest community
where you can find a lot of
information about computer
problems etc.
Software Development India:
TatvaSoft is experienced software
outsourcing company with clear
focus on quality software
development in .NET technology and
C++. We help our customers to cut
costs and maximize profit through
custom offshore software
development.


41








CHAPTER-III
REVIEW OF LITERATURE
42

Introduction:
Asset liability management:
Asset liability management (ALM) is the administration of policies and procedures that address
financial risks associated with changing interest rates, foreign exchange rates and other factors
that can affect a companys liquidity. Asset Liability Management (ALM) seeks to limit risk to
acceptable levels by monitoring and anticipating possible pricing differences between a
companys assets and liabilities.
Assets and Liabilities Management (ALM) is a dynamic process of planning, organizing,
coordinating and controlling the assets and liabilities their mixes, volumes, maturities, yields
and costs in order to achieve a specified Net Interest Income (NII).
Asset Liability Management (ALM) System:
In the normal course, they are exposed to credit and market risks in view of the asset
liability transformation. With the liberalization in the
Indian financial markets over the last few years and growing integration of domestic
markets and with external markets the risks associated with operations have become complex,
large, requiring stragic management. are now operating in a fairly deregulated environment and
are required to determine on their own, interest rates on deposits and advance in both domestic
and foreign currencies on a dynamic basis. The interest rates on investments in government and
other securities are also now market related. Intense competition for business involving both the
assets and liabilities, together with increasing volatility in the domestic interest rates, has brought
pressure on the management of to maintain a good balance among spreads, profitability and
long-term viability. Impudent liquidity management can put earnings and reputation at great risk.
These pressures call for structured and comprehensive measures and not just adahoc action. The
management of has to base their business decisions on a dynamic and integrated risk
management system and process, driven by corporate strategy. are exposed to several major risks
in course of their business-credit risk, interest rate and operational risk therefore important than
introduce effective risk management systems that address the issues related to interest rate,
currency and liquidity risks.
Its need to address these risks in a structured manner by upgrading their risk management
and adopting more comprehensive Asset-Liability management (ALM) practices than has been
done hitherto. ALM among other functions, is also concerned with risk management and
43

provides a comprehensive and dynamic framework for measuring, monitoring and managing
liquidity interest rate, foreign exchange and equity and commodity price risk of a that needs to
be closely integrated with the business strategy. It involves assement of various types of risks
altering the asset liability portfolio in a dynamic way in order to manage risks.
The initial focus of the ALM function would be to enforce the risk management
discipline, viz., and managing business after assessing the risks involved.
In addition, the managing the spread and riskiness, the ALM function is more
appropriately viewed as an integrated approach which requires simultaneous decisions about
asset/liability mix and maturity structure.
Risk Management in ALM
Risk management is a dynamic process, which needs constant focus and attention. The
idea of risk management is a well-known investment principle that the largest potential returns
are associated with the riskiest ventures. There can be no single prescription for all times,
decisions have to be reversed at short notice. Risk, which is often used to mean uncertainty,
creates both opportunities and problems for business and individuals in nearly every walk of life.
Risk sometimes is consciously analyzed and managed; other times risk is simply ignored,
perhaps out of lack of knowledge of its consequences. If loss regarding risk is certain to occur, it
may be planned for in advance and treated as to definite, known expense. Businesses and
individuals may try to avoid risk of loss as much as possible or reduce its negative consequences.
Several types of risks that affect individuals and businesses were introduced, together
with ways to measure the amount of risk. The process used to systematically manage risk
exposure is known as RISK MANAGEMENT. Whether the concern is with a business or an
individual situation, the same general steps can be used to systematically analyze and deal with
risk.
Steps In Risk Management
Risk identification
Risk evaluation
Risk management technique
Risk measurement
Risk review decisions
44

Integrated or enterprise risk management is an emerging view that recognizes the importance
of risk, regardless of its source, in affecting a firms ability to realize its strategic objectives. The
detailed risk management process is as follows;
Risk Identification
The first step in the risk management process is to identify relevant exposures to risk.
This step is important not only for traditional risk management, which focuses on uncertainty of
risks, but also for enterprise risk management, where much of the focus is on identifying the
firms exposures from a variety of sources, including operational, financial, and strategic
activities.
Risk Evaluation:
For each source of risk that is identified, an evaluation should be performed. At
this stage, uncertainty of risks can be categorized as to how often associated losses are
likely to occur. In addition to this evaluation of loss frequency, an analysis of the size, or
severity, of the loss is helpful. Consideration should be given both to the most probable
size of any losses that may occur and to the maximum possible losses that might happen.
Risk Management Techniques
The results of the analyses in second step are used as the basis for decisions regarding
ways to handle existing risks. In some situations, the best plan may be to do nothing. In other
cases, sophisticated ways to finance potential losses may be arranged. The available techniques
for managing risks are GAP Analysis, VAR Analysis, Heinrich Domino theory etc., with
consideration of when each technique is appropriate.
Risk Measurement
Once risk sources have been identified it is often helpful to measure the extent of the risk
that exists. As part of the overall risk evaluation, in some situations it may be possible to
measure the degree of risk in a meaningful way. In other cases, especially those involving
individuals computation of the degree of risk may not yield helpful information.
Risk Review Decisions
Following a decision about the optimal methods for handling identified risks, the
business or individual must implement the techniques selected. However, risk management
should be an ongoing process in which prior decisions are reviewed regularly. Sometimes new
45

risk exposures arise or significant changes in expected loss frequency or severity occur. The
dynamic nature of many risks requires a continual scrutiny of past analysis and decisions.
Dimensions of Risk
Specifically two broad categories of risk are the basis for classifying financial services risk.
Product market Risk.
Capital market Risk.
Economists have long classified management problems as relating to either The
Product Markets Risks or The Capital Markets Risks.
Total Financial Services Firms Risk.
Total Risk
(Responsibility of CEO)



Business Risk Financial Risk



Product Market Risk Capital Market Risk

(Responsibility of the (Responsibility of the
Chief Operating Officer) Chief Financial Officer)



Credit Interest rate
Strategic Liquidity
Regulatory currency
Operating Settlement
Human resources Basis
Legal

46

(I).Product Market Risk
This risk decision relate to the operating revenues and expenses of the form that impact the
operating position of the profit and loss statements which include crisis, marketing, operating
systems, labor cost, technology, channels of distributions at strategic focus. Product Risks relate
to variations in the operating cash flows of the firm, which affect Capital Market, required Rates
of Return;
(1) CREDIT RISK
(2) STRATEGIC RISK
(3) COMMODITY RISK
(4) OPERATIVE RISK
(5) HUMAN RESOURCES RISK
(6) LEGAL RISK
Risk in Product Market relate to the operational and strategic aspects of managing operating
revenues and expenses. The above types of Product Risks are explained as follows.
(1).Credit Risk
The most basic of all Product Market Risk in a or other financial intermediary is the erosion of
value due to simple default or non-payment by the borrower. Credit risk has been around for
centuries and is thought by many to be the dominant financial services today. Intermediate the
risk appetite of lenders and essential risk nests of borrowers. manage this risk by ; (A) making
intelligent lending decisions so that expected risk of borrowers is both accurately assessed and
priced; (B) Diversifying across borrowers so that credit losses are not concentrated in time; (C)
purchasing third party guarantees so that default risk is entirely or partially shifted away from
lenders.
(2). Strategic Risk
This is the risk that entire lines of business may succumb to competition or obsolescence. In the
language of strategic planner, commercial paper is a substitute product for large corporate loans.
Strategic risk occurs when its not ready or able to compete in a newly developing line of
business. Eearly entrants enjoyed a unique advantage over newer entrants. The seemingly
conservative act of waiting for the market to develop posed a risk in itself. Business risk accrues
from jumping into lines of business but also from staying out too long.

47

(3). Commodity Risk
Commodity prices affect and other lenders in complex and often unpredictable ways. The macro
effect of energy price increases on inflation also contributed to a rise in interest rates, which
adversely affected the value of many fixed rate financial assets. The subsequent crash in oil
prices sent the process in reverse with nearly equally devastating effects.
(4). Operating Risk
Machine-based system offer essential competitive advantage in reducing costs and improving
quality while expanding service and speed. No element of management process has more
potential for surprise than systems malfunctions. Complex, machine-based systems produce what
is known as the black box effect. The inner working of system can become opaque to their
users. Because developers do not use the system and users often have not constitutes a significant
Product Market Risk. No financial service firm can small management challenge in the modern
financial services company.
(5). Human Resources Risk
Few risks are more complex and difficult to measure than those of personnel policy; they are
Recruitment, Training, Motivation and Retention. Risk to the value of the Non-Financial Assets
as represented by the work force represents a much more subtle of risk. Concurrent with the loss
of key personal is the risk of inadequate or misplaced motivation among management personal.
This human redundancy is conceptually equivalent to safety redundancy in operating systems. It
is not inexpensive, but it may well be cheaper than the risk of loss. The risk and rewards of
increased attention to the human resources dimension of management are immense.
(6). Legal Risk
This is the risk that the legal system will expropriate value from the shareholders of financial
services firms. The legal landscape today is full of risks that were simply unimaginable even a
few years ago. More over these risks are very hard to anticipate because they are often unrelated
to prior events which are difficult and impossible to designate but the management of a financial
services firm today must have these risks at least in view. They can cost millions.
(II). Capital Market Risk:
In the Capital Market Risk decision relate to the financing and financial support of Product
Market activities. The result of product market decisions must be compared to the required rate
48

of return that results from capital market decision to determine if management is creating value.
Capital market decisions affect the risk tolerance of product market decisions related to
variations in value associated with different financial instruments and required rate of return in
the economy.
1. LIQUIDITY RISK
2. INTEREST RATE RISK
3. CURRENCY RISK
4. SETTLEMENT RISK
5. BASIS RISK
1. Liquidity Risk:
For experienced financial services professionals, the foremost capital market risk is that of
inadequate liquidity to meet financial obligations. The obvious form is an inability to pay desired
withdrawals. Depositors react desperately to the mere prospect of this situation.
They can drive a financial intermediary to collapse by withdrawing funds at a rate that exceeds
its capacity to pay. For most of this century, individual depositors who lost faith in ability to
repay them caused failures from liquidity. Funds are deposited primarily as a financial of rate.
Such funds are called purchased money or headset funds as they are frequently bought by
employees who work on the money desk quoting rates to institutions that shop for the highest
return. To check liquidity risk, firms must keep the maturity profile of the liabilities compatible
with that of the assets. This balance must be close enough that a reasonable shift in interest rates
across the yield curve does not threaten the safety and soundness of the entire firm.
2. Interest Rate Risk:
In extreme conditions, Interest Rate fluctuations can create a liquidity crisis. The fluctuation
in the prices of financial assets due to changes in interest rates can be large enough to make
default risk a major threat to a financial services firms viability. Theres a function of both the
magnitude of change in the rate and the maturity of the asset. This inadequacy of assessment and
consequent mispricing of assets, combined with an accounting system that did not record
unrecognized gains and losses in asset values, created a financial crisis. Risk based capital rules
pertaining to have done little to mitigate the interest rate risk management problem. The decision
to pass it off; however is not without large cost, so the cost benefit tradeoff becomes complex.

49

3. Currency Risk:
The risk of exchange rate volatility can be described as a form of basis risk among
currencies instead of basis risk among interest rates on different securities. Balance sheets
comprised of numerous separate currencies contain large camouflaged risks through financial
reporting systems that do not require assets to be marked to market. Exchange rate risk affects
both the Product Markets and The Capital Markets. Ways to contain currency risk have
developed in todays derivative market through the use of swaps and forward contracts. Thus,
this risk is manageable only after the most sophisticated and modern risk management technique
is employed
4. Settlement Risk:
Settlement Risk is a particular form of default risk, which involves the competitors.
Amounts settle obligations having to do with money transfer, check clearing, loan disbursement
and repayment, and all other inter- transfers within the worldwide monetary system. A single
payment is made at the end of the day instead of multiple payments for individual transactions.
5. Basis Risk:
Basis risk is a variation on the interest rate risk theme, yet it creates risks that are less easy to
observe and understand. To guard against interest rate risk, somewhat non comparable securities
may be used as a hedge. However, the success of this hedging depends on a steady and
predictable relationship between the two no identical securities. Basis can negate the hedge
partially or entirely, which vastly increases the Capital Market Risk exposure of the firm.
Risk Management System:
Assuming and managing risk is the essence of business decision-making. Investing in a new
technology, hiring a new employee, or launching a marketing campaign is all decisions with
uncertain outcomes. As a result all the major management decisions of how much risk to take
and how to manage the risk.

The implementation of risk management varies from business to business, from one management
style to another and from one time to another. Risk management in the financial services industry
is different from others. Circumstances, Institutions and Managements are different. On the other
50

hand, an investment decision is no recent history of legal and political stability, insights into the
potential hazards and opportunities.

Many risks are managed quantitatively. Risk exposure is measured by some numerical index.
Risk cost tradeoff many tools are described by numerical valuation formulas.
Risk management can be integrated into a risk management system. Such a system can be
utilized to manage the trading position of a small-specialized division or an entire financial
institution. The modules of the system can be implemented with different degrees of accuracy
and sophistication.
Risk Management System

Dynamics of risk factors



Cash flows Arbitrage
Generator Pricing Model




Price and Risk
Profile of Contingent Claims





Dynamic Risk Target
Trading Rules Optimizer Risk Profile

51

1.2 Risk Management System:
Arbitrage pricing models range from simple equations to large scale numerically
sophisticated algorithms. Cash flow generators also vary from a single formula to a
simulator that accounts for the dependence of cash flows on the history of the risk factors.
Financial engineers are continuously incorporating advances in econometric techniques,
asset pricing models, simulation techniques and optimization algorithms to produce better
risk management systems.
The important ingredient of the risk management approach is the treatment of risk factors
and securities as an integrated portfolio. Analyzing the correlation among the real,
financial and strategic assets of an organization leads to clear understanding of risk
exposure. Special attention is paid to risk factors, which translate to correlation among
the values of securities. Identifying the correlation among the basic risk factors leads to
more effective risk management.
Conclusion:
The burden of the Risk and its Costs are both manageable and transferable. Financial service
firms, in the addition to managing their own risk, also sell financial risk management to others.
They sell their services by bearing customers financial risks through the products they provide. A
financial firm can offer a fixed-rate loan to a borrower with the risk of interest rate movements
transferred from the borrower to the. Financial innovations have been concerned with risk
reduction than any other subject. With the possibility of managing risk near zero, the challenge
becomes not how much risk can be removed.
Financial services involve the process of intermediation between those who have financial
resources and those who need them, either as a principal or as an agent. Thus, value breaks into
several distinct functions, and it includes the intermediation of the following:
Maturity Preference mismatch, Default, Currency Preference mis-match, Size of transaction and
Market access and information.
Risk Management In Leo Labs It Solutions Pvt. Ltd:
They were required to introduce effective risk management systems to cover Credit risk, market
risk and Operations risk on priority.
Narasimham committee II, advised to address market risk in a structured manner by adopting
Asset and Liability Management practices with effect from April 1
st
1989.
52

Asset and liability management (ALM) is the Art and Science of choosing the best mix of assets
for the firms asset portfolio and the best mix of liabilities for the firms liability portfolio. It is
particularly critical for Financial Institutions.
For a long time it was taken for granted that the liability portfolio of financial firms was beyond
the control of the firm and so management concentrated its efforts on choosing the asset mix.
Institutions treasury department used the funds provided by deposits to structure an asset
portfolio that was appropriate for the given liability portfolio.
With the advent of Certificate of Deposits (CDs), had a tool by which to manipulate the mix of
liabilities that supported their Asset portfolios, which has been one of the active management of
assets and liabilities.
Asset and liability management program evolve into a strategic tool for management, the
main elements of the ALM system are:
ALM INFORMATION.
ALM ORGANISATION.
ALM FUNCTION.
ALM Information:
ALM is a risk management tool through which Market risk associated with business are
identified, measured and monitored to maintain profits by restructuring Assets and Liabilities.
The ALM framework needs to be built on sound methodology with necessary information
system as back up. Thus the information is key element to the ALM process.
There are various methods prevalent worldwide for measuring risks. These range from the
simple Gap statement to extremely sophisticate and data intensive Risk adjusted profitability
measurement (RAPM) methods. The central element for the entire ALM exercise is the
availability of adequate and accurate information.
However, the existing systems in many Indian do not generate information in manner required
for the ALM. Collecting accurate data is the biggest challenge before the s, particularly those
having wide network of branches, but lacking full-scale computerization.
Therefore the introduction of these information systems for risk measurement and monitoring
has to be addressed urgently.
53

The large network of branches and the lack of support system to collect information required
for the ALM which analysis information on the basis of residual maturity and behavioral
pattern, it would take time for in the present state to get the requisite information.
ALM Organization:
Successful implementation of the risk management process requires strong commitment on the
part of senior management in the to integrate basic operations and strategic decision making with
risk management.
The Board of Directors should have overall responsibility for management of risk and should
decide the risk management policy of the , setting limits for liquidity, interest rate, foreign
exchange and equity / price risk.
The Asset Liability Management Committee (ICICI) consisting of the senior management,
including CEO/CMD should be responsible for ensuring adherence to the limits set by the Board
of Directors as well as for deciding the business strategy of the (on the assets and liabilities
sides) in line with the budget and decided risk management objective.
The ALM support group consisting of operation staff should be responsible for analyzing,
monitoring and reporting the risk profiles to the ICICI. The staff should also prepare forecasts
(simulations) showing the effects of various possible changes in market condition related to the
balance sheet and recommend the action needed to adhere to internal limits,
The ICICI is a decision-making unit responsible for balance sheet planning from a risk-return
perspective including the strategic management of interest rate and liquidity risks. Each has to
decide on the role of its ICICI, its responsibility as also the decision to be taken by it. The
business and risk management strategy of the should ensure that it operates within the limits /
parameters set by the Board. The business issues that an ICICI would consider, inter alia, will
include product pricing for deposits and advances, desired maturity profile and mix of the
incremental Assets and Liabilities, etc. in addition to monitoring the risk levels of the , the ICICI
should review the results of and progress in implementation of the decisions made in the
previous meetings. The ICICI would also articulate the current interest rate view of the and base
its decisions for future business strategy on this view. In respect of this funding policy, for
instance, its responsibility would be to decide on source and mix of liabilities or sale of assets.
Towards this end, it will have to develop a view on future direction of interest rate movements
and decide on funding mixes between fixed vs. floating rate funds, wholesale vs. retail deposits,
54

Money markets vs. Capital market funding, domestic vs. foreign currency funding etc. Individual
will have to decide the frequency for holding their ICICI meetings.
Typical Business Of Icici:
Reviewing of the impact of the regulatory changes on the industry.
Overseeing the budgetary process;
Reviewing the interest rate outlook for pricing of assets and liabilities (Loans
and Deposits)
Deciding on the introduction of any new loan / deposit product and their impact
on interest rate / exchange rate and other market risks;
Reviewing the asset and liability portfolios and the risk limits and thereby,
assessing the capital adequacy;
Deciding on the desired maturity profile of incremental assets and liabilities and
thereby assessing the liquidity risk; and
Reviewing the variances in actual and projected performances with regard to
Net Interest Margin (NIM), spreads and other balance sheet ratios.
Composition Of Leo Labs It Solutions Pvt. Ltd:
The size ( number of members) of Leo Labs IT Solutions Pvt. Ltd would depend on the size of
each institution, business mix and organizational complexity, To ensure commitment of the Top
management and timely response to market dynamics, the CEO/MD or the GM should head the
committee. The chiefs of Investment, Credit, Resources Management or Planning, Funds
Management / Treasury (domestic), etc., can be members of the committee. In addition, the head
of the computer (technology) Division should also be an invitee for building up of
MIS and related computerization. Some may even have Sub-Committee and Support
Groups.
ALM Organization consists of following categories :
ALM BOARD
Leo Labs IT Solutions Pvt. Ltd
ALM CELL
COMMITTEE OF DIRECTORS

55

ALM Board:
The Board of management should have overall responsibility for management of risk and
should decide the risk management policy of the and set limits for liquidity and interest
rate risks.
Leo Labs It Solutions Pvt. Ltd:
It has constituted an Asset- Liability committee (Leo Labs IT Solutions Pvt. Ltd). The committee
may consist of the following members.
i) General Manager / in Head of Committee
ii) General Manager (Loans & Advances) Member
iii) General Manager (CMI & AD) Member
iv) AGM / Head of the ALM Cell Member
The Leo Labs IT Solutions Pvt. Ltd is a decision making unit responsible for ensuring adherence
to the limits set by board as well as for balance sheet planning from risk return perspective
including the strategic management of interest rate and liquidity risks, in line with the budget and
decided risk management objectives.
The Business issues that an Leo Labs IT Solutions Pvt. Ltd would consider interalia, will include
fixation of interest rates for both deposits and advances, desired maturity profile of the
incremental assets and liabilities etc.
The Leo Labs IT Solutions Pvt. Ltd would also articulate the current interest rate due of the and
base its decisions for future business strategy on this view. In respect of funding policy, for
instance, its responsibility would be decided on source and mix of liability.
Individual will have to decide the frequency for their Leo Labs IT Solutions Pvt. Ltd meetings.
However, it is advised that Leo Labs IT Solutions Pvt. Ltd should meet at least once in a
fortnight. The Leo Labs IT Solutions Pvt. Ltd should review results of and process in
implementation of the decisions made in the previous meetings
ALM Cell:
ALM desk / cell consisting of operating staff should be responsible for analyzing, monitoring
and reporting the profiles to the Leo Labs IT Solutions Pvt. Ltd. The staff should also prepare
forecasts (simulations) showing the effects of various possible changes in market conditions
related to the balance sheet and recommend the action needed to adhere to internal limits.
56

Committee Of Directors:
They should also constitute professional, management and supervisory committee, consisting of
three to four directors, which will oversee the implementation of the ALM system, and review
its functioning periodically.
ALM PROCESS:
The scope of ALM function can be described as follows:
1. Liquidity Risk Management
2. Interest Rate Risk Management
3. Currency Risk Management
4. Settlement Risk Management
5. Basis Risk Management
The RBI guidelines mainly address Liquidity Risk Management and Interest Rate Risk
Management.
The following are the concepts discussed for analysis of Asset-Liability Management under
above mentioned risks.
Liquidity Risk
Maturity profiles
Interest rate risk
Gap analysis
(1)Liquidity Risk Management:
Measuring and managing liquidity needs are vital activities of the s. By assuring an ability to
meet its liability as they become due, liquidity management can reduce the probability of an
adverse situation development. The importance of liquidity transcends individual institutions, as
liquidity shortfall in one institution can have repercussions on the entire system.
Liquidity risk management refers to the risk of maturing liability not finding enough maturing
assets to meet these liabilities. It is the potential inability to meet the s liability as they became
due. This risk arises because borrows funds for different maturities in the form of deposits,
market operations etc. and lock them into assets of different maturities.
Liquidity Gap also arises due to unpredictability of deposit withdrawals, changes in loan
demands. Hence measuring and managing liquidity needs are vital for effective and viable
operations
57

Liquidity measurement is quite a difficult task and usually the stock or cash flow
approaches are used for its measurement. The stock approach used certain liquidity ratios.
The liquidity ratios are the ideal indicators of liquidity of operating in developed financial
markets, the ratio do not reveal the real liquidity profile of which are operating generally
in a fairly illiquid market. The assets, which are commonly considered as liquid like
Government securities, have limited liquidity when the market and players are in one
direction. Thus analysis of liquidity involves tracking of cash flow mismatches.
The statement of structural liquidity may be prepared by placing all cash inflows and
outflows in the maturity ladder according to the expected timing of cash flows.
The MATURITY PROFILE could be used for measuring the future cash flows in different time
bands.
The position of Assets and Liabilities are classified according to the maturity patterns a
maturing liability will be a cash outflow while a maturing asset will be a cash inflows. The
measuring of the future cash flows of is done in different time buckets.
The time buckets, given the statutory Reserve cycle of 14 days may be distributed as under:
1. 1 to 14 days
2. 15 to 28 days
3. 29 days and up to 3 months
4. Over 3 months and up to 6 months
5. Over 6 months and up to 1 year
6. Over 1 year and up to 3 years
7. Over 3 years and up to 5 years
8. Over 5 years.







58

Maturity Profile Liquidity
Head Of Accounts
A.Outflows
Classification into time buckets
1.Capital, Reserves and Surplus

Over 5 years bucket.
2.Demand Deposits (Current &
Savings Deposits)
Demand Deposits may be classified
into volatile and core portions, 25 % of
deposits are generally withdraw able
on demand. This portion may be
treated as volatile. While volatile
portion may be placed in the first time
bucket i.e., 1-14 days, the core portion
may be placed in 1-2 years, bucket.

3. Term Deposits

Respective maturity buckets.
4. Borrowings Respective maturity buckets.
5. Other liabilities and provisions
(i) Bills Payable
(ii) Inter-office Adjustment
(iii)Provisions for NAPs
a) sub-standard
b) doubtful and Loss
(iv)provisions for depreciation
in Investments
(v)provisions for NAPs investment
(vi)provisions for other purposes
(I)1-14 days bucket
(ii)Items not representing cash
payable may be placed in over 5
years bucket
(iii)
a) 2-5 years bucket.
b)Over 5 years bucket
(iv) Over 5 years bucket.
(v)A)2-5 years bucket.
b)Over 5 years bucket
(vi)Respective buckets depending on
the purpose.

59

B. Inflows:
1.Cash 1-14 days bucket.
2. Balance with other s
(i)Current Account
(ii)Money at call and short Notice,
Term Deposits and other
Placements
(i)Non-withdraw able portion on
account of stipulations of
minimum balances may be shown
Less than 1-14 days bucket.
(ii)Respective maturity buckets.
3Investments
(i)Approved securities
(ii) Corporate
Debentures and
bonds, CDs and CPs,
redeemable
preference shares,
units of Mutual
Funds (close ended).
Etc.
(iii)Share / Units of Mutual
Funds
(open ended)
(iii) Investment in
subsidiaries /
Joint Ventures.

(i)Respective maturity buckets
excluding the amount required to
be reinvested to maintain SLR
(ii)Respective Maturity buckets.
Investments classified as NPAs
Should be shown under 2-5 years
bucket (sub-standard) or over 5
years bucket (doubtful and loss).
(iii)Over 5 years bucket.
(iv)Over 5 years bucket.
4.Advances (performing / standard)
(i)Bills Purchased and
Discounted
(including bills under
DUPN)
(iii) Cash Credit / Overdraft
(including TOD) and
(i)Respective Maturity buckets.
(ii)should undertake a styud
ofbehavioral and seasonal pattern
of a ailments based on outstanding
and the core and volatile portion
should be identified. While the
volatile portion could be shown in
60

Demand Loan component of
Working Capital.
(iii)Term Loans

the respective maturity bucket. The
core portion may be shown under
1-2 years bucket.
(iii)Interim cash flows may be
shown under respective maturity
buckets.

5.NPAs
b. Sub-standard
c. Doubtful and Loss

(I) 2-5 years bucket.
(ii) Over 5 years bucket.
6. Fixed Assets

Over 5 years bucket.
7.Other-office Adjustment
(i) Inter-office Adjustment
(ii) Others

(i) As per trend analysis,
Intangible items or items
not representing cash
receivables may be shown
in over 5 years bucket.
(i) Respective maturity
buckets. Intangible assets
and assets not representing
cash receivables may be
shown in over 5 years
bucket.






61

Terms used:
CDs: Certificate of Deposits.
CPs: Commercial Papers.
DTL PROFILE: Demand and Time Liabilities.
Inter office adjustment:
Outflows: Net Credit Balances
Inflows: Net Debt Balances
Other Liabilities: Cash payables, Income received in advance, Loan Loss and
Depreciation in Investments.
Other assets: Cash Receivable, Intangible Assets and Leased Assets.
(2)Interest Rate Risk:
Interest Rate Risk refers to the risk of changes in interest rates subsequent to the creation of the
assets and liabilities at fixed rates. The phased deregulations of interest rates and the operational
flexibility given to in pricing most of the assets and liabilities imply the need for ing system to
hedge the interest rate risk. This is a risk where changes in the market interest rates might
adversely affect a s financial conditions.
The changes in interest rates affect in large way. The immediate impact of change in interest
rates is on s earnings by changing its Net Interest Income (NII). A long term impact of changing
interest rates is on s Market Value of Equity (MVE) or net worth as the economic value of s
assets, liabilities and off-balance sheet positions get affected due to variation in market interest
rates.
The risk from the earnings perspective can be measured as changes in the Net Interest Income
(NII) OR Net Interest Margin (NIM).
There are many analytical techniques for measurement and management of interest rate risk. In
MIS of ALM, slow pace of computerization in and the absence of total deregulation, the
traditional GAP ANALYSIS is considered as a suitable method to measure the interest rate risk.



62

Data Interpretation:
Gap Analysis:
The Gap or mismatch risk can be measured by calculating Gaps over different time buckets as at
a given date. Gap analysis measures mismatches between rate sensitive liabilities and rate
sensitive assets including off-balance sheet position.
An asset or liability is normally classified as rate sensitive if:
If there is a cash flow within the time interval.
The interest rate resets or reprises contractually during the interval.
RBI changes the interest rates i.e., on saving deposits, export credit, refinance, CRR
balances and so on, in case where interest rate are administered.
It is contractually pre-payable or withdraw able before the stated maturities
The Gap is the difference between Rate Sensitive Assets (RSA) and Rate sensitive Liabilities
(RSA) for each time bucket.
The positive GAP indicates that RSAs are more than RSLs (RSA>RSL).
The negative GAP indicates that RSAs are more than RSALs (RSA<RSL).
63









CHAPTER-IV
DATA ANALYSIS
&
INTERPRETATION
64

Table 1: Comparative Balance Sheet as on 31
st
March 2007 -2008
Particulars 2007 (In 000) 2008 (in 000) Increase (+) /
Decrease ( - )
(in Rs)
Percentage
(%)
Assets
Current Assets :-
Closing stock 2523419 3090115 566696 2.2
Sundry Debtors 38797183 48406912 9609729 24.7
Cash & Bank balances 34839488 77625210 42785722 122.8
Deposits 10827156 14469733 3642577 33.64
Prepaid expenses 2471795 2330405 (141390) (5.7)
Grant Receivable 590000 3080000 2490000 422.0
Loans & Advances 54052442 41251539 (12800903) (23.6)
Total Current Assets 144101483 190253915 46152432 32.0
Fixed Assets 590065042 637244660 47179618 7.99
Capital works in progress 155223789 398294668 243070879 156.5
Miscellaneous expenses 4839890 2036739 (2803151) (57.9)
Profit & loss A/C DR balance - 213107074 213107074 100
Total Assets 894230204 1440937056 546706852 61.13
Liabilities & Capital
Liabilities
Current Liabilities 206057914 246989936 40932022 19.8
Other liabilities 1520355 26311535 24791180 1630.6
Total Current Liabilities 207578269 273301471 252543202 121.6
Secured loans 197445339 223207392 25762053 13.0
Unsecured loans 19334436 223207392 203872956 1054.5
Deferred revenue 12007000 7638000 (4369000) (36.3)
Grants 239241342 675969999 436728657 182.5
Total Liabilities 675606386 1403324254 727717868 107.7
Share Capital 37612802 37612802 0 0
Profit carried to balance sheet 181011016 - (181011016) (100)
Total Liabilities & Capital 894230204 1440937056 546706852 61.13


65

Interpretation of comparative balance sheet of 2007-2008:
Sundry debtors increased by 24.7.17 % i.e., in Rupees 9609729.
Cash and bank balances increased by 122.8 % i.e, in Rupees 42785722
Deposits increased by 33.64% i.e, in Rupees 3642577.
Fixed assets increased by 7.99 % i.e., in Rupees 4717961.
Current assets increased by 32.0 % i.e., in Rupees 46152432 .
Secured Loans increased by 13.0 % i.e., in Rupees 25762053. And Un secured loans
highly Increased by 203872956 Rupees.
Current liabilities increased by 19.8 % ie., in Rupees 40932022
And other liabilities highly increased to Rupees 24791180.
Share capital of Leo Labs remained unchanged in the year 2007-08.

66

Table 2: Comparative Balance Sheet as on 31
st
March 2008-2009
Particulars 2008 (In 000) 2009 (in 000) Increase (+) /
Decrease ( - )
(in Rs)
Percentage
(%)
Assets
Current Assets :-
Closing stock 3090115 3980610 890495 28.8
Sundry Debtors 48406912 366347339 317940427 656.8
Cash & Bank balances 77625210 48315438 (29309772) (37.7)
Deposits 14469733 13534506 (935227) (6.4)
Prepaid expenses 2330405 3975947 1645542 70.6
Grant Receivable 3080000 28389695 25309695 821.7
Loans & Advances 41251539 58465827 17214288 41.73
Total Current Assets 190253915 202737762 12483847 6.56
Fixed Assets 637244660 1328034574 690789914 108.4
Capital works in progress 398294668 288704250 (109590418) (27.5)
Miscellaneous expenses 2036739 2036739 0 0
Profit & loss A/C DR balance 213107074 - (213107074) (100)
Total Assets 1440937056 1821513325 380576269 26.41
Liabilities & Capital
Liabilities
Current Liabilities 246989936 20677415 (226312521) (91.62)
Other liabilities 26311535 3155050 (23156485) (88.0)
Total Current Liabilities 273301471 23832465 (249469006) (91.27)
Secured loans 223207392 189980342 (33227050) (14.88)
Unsecured loans 223207392 116594260 (106613132) (47.7)
Deferred revenue 7638000 7638000 0 0
Grants 675969999 634082839 (41887160) (6.1)
Total Liabilities 1403324254 972127906 (431196348) (30.7)
Share Capital 37612802 37612802 0 0
Profit carried to balance sheet - 811772617 811772617 100
Total Liabilities & Capital 1440937056 1821513325 418189071 29.79


67

Interpretation of comparative balance sheet of 2008-2009:
Sundry debtors increased enormously by Rupees 317940427.
Cash and bank balances decreased by 37.7 % i.e, in Rupees 29309772.
Deposits decreased by 6.4% i.e, in Rupees 935227.
Fixed assets increased by 108.4 % i.e., in Rupees 690789914.
Total Current assets increased by 6.56 % i.e., in Rupees 12483847.
Secured Loans decreased by 14.88 % i.e., in Rupees 33227050. And Un secured loans
decreased by 106613132 Rupees.
Current liabilities decreased by 91.62 % ie., in Rupees 226312521
And other liabilities highly decreased by 88 % i.e, Rupees 23156485.
Share capital of Leo Labs remained unchanged in the year 2008-09.

68

Table 3: Comparative Balance Sheet as on 31
st
March 2009-2010
Particulars 2009 (In 000) 2010 (in 000) Increase (+) /
Decrease ( - )
(in Rs)
Percentage
(%)
Assets
Current Assets :-
Closing stock 3980610 3980610 0 0
Sundry Debtors 366347339 42244663 (324102679) (88.4)
Cash & Bank balances 48315438 126441810 78126372 161.7
Deposits 13534506 16995779 3461273 25.5
Prepaid expenses 3975947 60544413 56568466 1422.7
Grant Receivable 28389695 9440000 (28389695) (100)
Loans & Advances 58465827 81271376 22805549 39.0
Total Current Assets 202737762 286428651 83690889 41.28
Fixed Assets 1328034574 765762267 627727693 47.2
Capital works in progress 288704250 275740360 (12963890) (4.4)
Miscellaneous expenses 2036739 243577 (1793162) (88.0)
Total Assets 1821513325 1328174855 (493338470) (27.8)
Liabilities & Capital
Liabilities
Current Liabilities 20677415 226600588 205923173 995.8
Other liabilities 3155050 23037559 19882509 630.1
Total Current Liabilities 23832465 249638147 225805682 947.4
Secured loans 189980342 128061341 (61919001) (32.59)
Unsecured loans 116594260 15378314 (101215946) (86.81)
Deferred revenue 7638000 6638000 (7000000) (91.6)
Grants 634082839 613051364 (21031475) (3.3)
Total Liabilities 972127906 1012767166 40639260 4.1
Share Capital 37612802 37612802 0 0
Profit carried to balance sheet 811772617 277794887 (533977730) 65.7
Total Liabilities & Capital 1821513325 1328174855 (493338470) (27.8)

69

Interpretation of comparative balance sheet of 2009-2010:
Sundry debtors decreased by 88.4 % i.e., in Rupees 324102679.
Cash and bank balances increased by 161.7 % i.e, in Rupees 78126372.
Deposits increased by 25.5 % i.e, in Rupees 3461273.
Fixed assets increased by 47.2 % i.e., in Rupees 627727693.
Total Current assets increased 41.28 % i.e., in Rupees 83690889.
Secured Loans decreased by 32.59 % i.e., in Rupees 61919001. And Un secured loans
decreased by 101215946 Rupees.
Current liabilities enormously increased by Rupees 205923173
And other liabilities enormously increased by 630.1% i.e, Rupees 19882509.
Share capital of Leo Labs remained unchanged in the year 2009-2010.



70

Table 4: Comparative Balance Sheet as on 31
st
March 2010 -2011
Particulars 2010 (In 000) 2011(in 000) Increase (+) /
Decrease ( - )
(in Rs)
Percentage
(%)
Assets
Current Assets :-
Closing stock 3980610 3980610 0 0
Sundry Debtors 42244663 144216404 101971741 241.38
Cash & Bank balances 126441810 81906596 (44535214) (35.22)
Deposits 16995779 16998468 26890 0.01
Prepaid expenses 60544413 0 (6054413) (100)
Grant Receivable 9440000 192739470 183299470 1941.73
Loans & Advances 81271376 7570116204 7488844828 9214.61
Total Current Assets 286428651 5155242691 4868814040 1699.83
Fixed Assets 765762267 746996158 (18766109) (2.45)
Capital works in progress 275740360 554775067 (220263293) (79.88)
Miscellaneous expenses 243577 0 (243577) (100)
Profit & loss A/C DR balance - - - -
Total Assets 1328174855 6457013916 5128839061 386.15
Liabilities & Capital
Liabilities
Current Liabilities 226600588 345361753 118761165 52.40
Other liabilities 23037559 16269037 (6768522) (29.38)
Total Current Liabilities 249638147 508052128 258413981 103.51
Secured loans 128061341 573354104 445292763 347.71
Unsecured loans 15378314 6299037 (9079277) (59.3)
Deferred revenue 6638000 1269000 (5369000) (80.88)
Grants 613051364 849661467 236610103 38.59
Total Liabilities 1012767166 1938635736 925868570 91.41
Share Capital 37612802 37612802 0 0
Profit carried to balance sheet 277794887 6259365378 5981570491 2153
Total Liabilities & Capital 1328174855 6457013916 5128839061 386.15

71

Interpretation of comparative balance sheet of 2010-2011:
Sundry debtors increased enormously by 241.38 % i.e., in Rupees 101971741
Cash and bank balances decreased by 35.22 % i.e, in Rupees 44535214.
Deposits increased by .01 % i.e, in Rupees 26890.
Fixed assets decreased by 2.45% i.e., in Rupees 18766109.
Total Current assets increased enormously by Rupees 4868814040.
Secured Loans increased by 347.71 % i.e., in Rupees 445292763. And Un secured
loans decreased by 9079277 Rupees.
Current liabilities increased by 52.40 % ie., in Rupees 118761165.
And other liabilities decreased by 29.38 % i.e, Rupees 6768522.
Share capital of Leo Labs was remained unchanged in the year 2010-2011.



72

Table 5: Analysis of Comparative Balance Sheets (2007-2008 to 2010-2011)
Particulars 2007-2008
%
2008-2009

%
2009-2010
%
2010-2011
%
Assets
Current Assets :-
Closing stock 2.2 28.8 0 0
Sundry Debtors 24.7 656.8 (88.4) 241.38
Cash & Bank balances 122.8 (37.7) 161.7 (35.22)
Deposits 33.64 (6.4) 25.5 0.01
Prepaid expenses (5.7) 70.6 1422.7 (100)
Grant Receivable 422.0 821.7 (100) 1941.73
Loans & Advances (23.6) 41.73 39.0 9214.61
Total Current Assets 32.0 6.56 41.28 1699.83
Fixed Assets 7.99 108.4 47.2 (2.45)
Capital works in progress 156.5 (27.5) (4.4) (79.88)
Miscellaneous expenses (57.9) 0 (88.0) (100)
Profit & loss A/C DR balance 100 (100) -
Total Assets 61.13 29.79 (27.8) 386.15
Liabilities & Capital
Liabilities
Current Liabilities 19.8 (91.62) 995.8 52.40
Other liabilities 1630.6 (88.0) 630.1 (29.38)
Total Current Liabilities 121.6 (91.27) 947.4 103.51
Secured loans 13.0 (14.88) (32.59) 347.71
Unsecured loans 1054.5 (47.7) (86.81) (59.3)
Deferred revenue (36.3) 0 (91.6) (80.88)
Grants 182.5 (6.1) (3.3) 38.59
Total Liabilities 107.7 (30.7) 4.1 91.41
Share Capital 0 0 0 0
Profit carried to balance sheet (100) 100 65.7 2153
Total Liabilities & Capital 61.13 29.79 (27.8) 386.15

73

Interpretation
The above tables present the comparative balance sheets of the company for the period 2007
2008 to 2010-2011. During the year 2007 2008 total current assets were Rs. 190,253,915, Next
year they increased to Rs.202, 737,762. In the year 2008-09 they were enhanced and in 2008-09
increased to Rs. 286,428,651. And in 2010-11 increased to Rs.5, 155,242,691.
During the year 2007-2008, fixed assets were Rs. 637,244,660. The investment in fixed assets
has also increased to 108.4 % in 2008-09. The investments in fixed assets has further increased
to 47.72 % in the year 2009-10 ie. to Rs. 765,762,267 ( increased amt 627727693).
In 2010-11 fixed assets were decreased to 2.45 % . Total fixed assets is showing an increasing
trend. Which is good sign for the company.
The Total current liabilities are showing an increasing trend. In year 2007 the total current
liabilities were Rs 207,578,269. And Rs 508,052,128. In the year 2011. Which shows that the
total current liabilities of Leo labs are in increasing trend
The Shares capital of Leo Labs was constant. Reverses and surplus has increased and it may be
because the company has started making substantial profits.
The unsecured loans of Leo lebs are in decreasing trend. Which shows that firm is good in debt
management.
74










CHAPTER-V
FINDINGS
SUGGESTIONS
CONCLUSION









75

Findings:
1. ALM technique is aimed to tackle the market risks. Its objective is to stabilize and improve
Net interest Income (NII).
2. Implementation of ALM as a Risk Management tool is done using maturity profiles and GAP
analysis.
3. ALM presents a disciplined decision making framework for while at the same time guarding
the risk levels.
4. In 2009-10, the fixed assets has increased to Rs. 765,762,267 and in 2010-11 it has decreased
to Rs 746,996,158.
5. In the year 2008-09 the Total Current Assets were increased to Rs 202,737,762, and in 2009-
10 to Rs. 286,428,651.They were further increased to Rs. 5,155,242,691 in the year 2010-
11.The total current assets are showing an increasing trend. This is good for the company.
6. The total liabilities were Rs. 1,403,324,254.during the year 2007-2008.They were Rs
1,938,635,736 in the year 2010-11.
7. The share capital of Leo Labs remained constant all the years.
76

Suggestions:
1. The company should strengthen its management information system (MIS) and
computer processing capabilities for accurate measurement of liquidity and interest
rate Risks in their Books.
2. In the short term the Net interest income or Net interest margins (NIM) creates
economic value of the which involves up gradation of existing systems &
Application software to attain better & improvised levels.
3. It is essential that remain alert to the events that effect its operating environment &
react accordingly in order to avoid any undesirable risks.
4. Leo Labs IT Solutions Pvt. Ltd requires efficient human and technological
infrastructure which will in future lead to smooth integration of the risk management
process with effective business strategies.
5. The company should focus on its effective management of cash and bank balances.
As they are fluctuating over the years.








77

Conclusion:
The purpose of ALM is not necessarily to eliminate or even minimize risk. The level of risk will
vary with the return requirement and entitys objectives.
Financial objectives and risk tolerances are generally determined by senior management of an
entity and are reviewed from time to time.
All sources of risk are identified for all assets and liabilities. Risks are broken down into their
component pieces and the underlying causes of each component are assessed.
Relationships of various risks to each other and/or to external factors are also identified.
Risk exposure can be quantified 1) relative to changes in the component pieces, 2) as a
maximum expected loss for a given confidence interval in a given set of scenarios, or 3) by the
distribution of outcomes for a given set of simulated scenarios for the component piece over
time.
Regular measurement and monitoring of the risk exposure is required. Operating within a
dynamic environment, as the entitys risk tolerances and financial objectives change, the existing
ALM strategies may no longer be appropriate.
Hence, these strategies need to be periodically reviewed and modified. A formal, documented
communication process is particularly important in this step.
78

ANNEXURE
Balance sheet of Leo Labs:
Particulars 2007(In 000) 2008(In000) 2009(In000) 2010(In000) 2011(In000)
Assets
Current Assets :-
Closing stock 2523419 3090115 3980610 3980610 3980610
Sundry Debtors 38797183 48406912 366347339 42244663 144216404
Cash & Bank balances 34839488 77625210 48315438 126441810 81906596
Deposits 10827156 14469733 13534506 16995779 16998468
Prepaid expenses 2471795 2330405 3975947 60544413 0
Grant Receivable 590000 3080000 28389695 9440000 192739470
Loans & Advances 54052442 41251539 58465827 81271376 7570116204
Total Current Assets 144101483 190253915 202737762 286428651 5155242691
Fixed Assets 590065042 637244660 1328034574 765762267 746996158
Capital WIP 155223789 398294668 288704250 275740360 554775067
Miscellaneous
expenses
4839890 2036739 2036739 243577 0
Profit & loss A/C DR
balance
- 213107074 -
Total Assets 894230204 1440937056 1821513325 1328174855 6457013916
Liabilities & Capital
Liabilities
Current Liabilities 206057914 246989936 20677415 226600588 345361753
Other liabilities 1520355 26311535 3155050 23037559 16269037
Total C Liabilities 207578269 273301471 23832465 249638147 508052128
Secured loans 197445339 223207392 189980342 128061341 573354104
Unsecured loans 19334436 223207392 116594260 15378314 6299037
Deferred revenue 12007000 7638000 7638000 6638000 1269000
Grants 239241342 675969999 634082839 613051364 849661467
Total Liabilities 675606386 1403324254 972127906 1012767166 1938635736
Share Capital 37612802 37612802 37612802 37612802 37612802
Profit carried to
balance sheet
181011016 - 811772617 277794887 6259365378
Total Liabilities &
Capital
894230204 1440937056 1821513325 1328174855 6457013916


79

Bibliography:
Title of the Books Author
1. Assets and Liabilities Management. Vansant Joshi.
2. India financial system M.Y. Khan
Websites:
Www. Leo Labs IT Solutions Pvt. Ltd.org
www.assetmanagement.com