PROJECT:

INDUS MOTORS LTD

RISK MANAGEMENT DEPARTMENT

SUBMITTED BY:
Qasim Ali

10022120-088

Yasir Azam

10022120-061

Usman Arshad

10022120-022

Mandeel Gulzar

10022120-025

Usman Mir

10022120-075

SUBMITTED TO:
Miss. Saima Naz

BBA SEMESTER 8th(AT)

UNIVERSITY OF GUJRAT

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INDUS MOTORS LTD

RISK MANAGEMENT DEPARTMENT

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Table of Contents
HISTORY:............................................................................................................................4
VISION AND MISSION STATEMENT:............................................................................5
MANAGEMENT POLICY:................................................................................................5
RISK MANAGEMENT POLICY:......................................................................................6
POLICY OBJECTIVES:.................................................................................................6
THE GOALS OF RISK MANAGEMENT STRATEGY ARE:......................................7
THESE OBJECTIVES WILL BE ACHIEVED BY:.......................................................7
RISK MANAGEMENT AT INDUS MOTORS:.................................................................8
RISK MANAGEMENT PROCESS:...................................................................................9
RISKS FACED BY INDUS MOTORS:............................................................................10
PRICE/MARKET RISK:...............................................................................................10
Risk policy:................................................................................................................10
FOREIGN EXCHANGE RATE RISK:.........................................................................10
Risk policy:................................................................................................................11
INTEREST RATE RISK:..............................................................................................11
Risk policy:................................................................................................................12
CREDIT/ FINANCIAL RISK:......................................................................................12
Risk policy:................................................................................................................13
LIQUIDITY RISK:........................................................................................................13
Risk policy:................................................................................................................14
COMMODITY PRICE RISK:.......................................................................................14
Risk policy:................................................................................................................14
OPERATIONAL RISK:.................................................................................................14
Risk policy:................................................................................................................14

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POLITICAL RISKS:.....................................................................................................14
CAPITAL RESOURCES...............................................................................................15
Risk policy:................................................................................................................15
REFERENCE PAGE:....................................................................................................17

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HISTORY:
Indus Motor Company (IMC) is a joint venture between the House of Habib , Toyota
Motor Corporation Japan (TMC) , and Toyota Tsusho Corporation Japan (TTC) for
assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan
since July 01, 1990. IMC is engaged in sole distributorship of Toyota and Daihatsu Motor
Company Ltd. Vehicles in Pakistan through its dealership network.
The company was incorporated in Pakistan as a public limited company in December
1989 and started commercial production in May 1993. The shares of company are quoted
on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho
Corporation have 25 % stake in the company equity. The majority shareholder is the
House of Habib.
IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in
an area measuring over 105 acres.
Indus Motor Company's plant is the only manufacturing site in the world where both
Toyota and Daihatsu brands are being manufactured.
Heavy investment was made to build its production facilities based on state of art
technologies. To ensure highest level of productivity world-renowned Toyota Production
Systems are implemented.
IMC's Product line includes 6 variants of the newly introduced Toyota Corolla, Toyota
Hilux Single Cabin 4x2 and 4 versions of Daihatsu Cuore. We also have a wide range of
imported vehicles.

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VISION AND MISSION STATEMENT:

Vision is to be the most respected and successful enterprise, delighting customers with a
wide range of products and solutions in the automobile industry with the best people and
the best technology".

The most respected.

The most successful.
Delighting customers.
Wide range of products.
The best people.
The best technology.

Mission of Toyota is to provide safe & sound journey. Toyota is developing various new
technologies from the perspective of energy saving and diversifying energy sources.
Environment has been first and most important issue in priorities of Toyota and working
toward creating a prosperous society and clean world.

MANAGEMENT POLICY:
Management at Indus Motor Company are committed to fulfil the requirements of
Integrated Management System and to try to continuously improve upon it in order to:

Manufacture high Quality Products.

Generate Customer Satisfaction.
Provide Service to the Society.
Maintain Market Leadership.

Identify and avoid/mitigate those environmental aspects which have negative

environmental impacts. Comply with all applicable legal, regulatory and other
requirements related to Environment, Health and Safety, Assist society by making the
environment more friendly. Design and maintain facilities, establish systems, provide
training and conduct operations in a manner that safeguard people and property.
Identify, evaluate & mitigate health risks related to our operations that potentially affect
our employees, contractors and the public.

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RISK MANAGEMENT POLICY:

Risk management is all about managing our threats and opportunities. By managing our
threats effectively we will be in a stronger position to deliver our objectives. By
managing our opportunities well we will be in a better position to provide improved
services and better value for money.
In this strategy risk is defined as something happening that may have an impact on the
achievement of our objectives. When our management of risk goes well it often remains
unnoticed. When it fails, however, the consequences can be significant and high profile.
Effective risk management is needed to prevent such failures.
A risk management strategy is an essential element of strategic planning. We have a
corporate plan covering the whole of our activities and the risk management strategy
should be seen as sitting under this broader umbrella.
This risk management strategy describes the processes that we will put in place and link
together to identify, assess, address and review and report on our risks. The strategy
provides the framework for the management of risk across the whole Council.
Purpose of policy:
The purpose of this policy is to articulate risk management philosophy and the processes
and practices that are in place to identify, communicate and manage material risks across
the organization. The policy also ensures that responsibilities have been appropriately
delegated for risk management.

POLICY OBJECTIVES:
The application of this policy and related procedures will provide the basis for a strong
risk management framework which comprises:

More confident decision making and planning.

Better identification of opportunities and threats.
Better management of opportunities and threats.
More effective allocation and use of resources.
Improved stakeholder confidence and trust.

Risk is a factor of ever-day life and can never be eliminated completely. All employees
must understand the nature of risk and accept responsibility for risks associated with their

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area of authority. The necessary support, assistance and commitment of senior
management will be provided.

THE GOALS OF RISK MANAGEMENT STRATEGY ARE:

Integrate Risk Management into the culture of the organization.

Manage risk in accordance with best practice.
Anticipate and respond quickly to social, environmental and legislative change.
Prevent injury and damage and reduce the cost of risk.
Raise awareness of the need for risk management.

THESE OBJECTIVES WILL BE ACHIEVED BY:

Establishing a Risk Management organizational structure to act in an advisory and

guiding capacity and which is accessible to all employees.

Include Risk Management as one of the implications to be considered in every

committee report.
Adopt processes, which demonstrate that Risk Management principles are being

applied across the whole organization.

Provide training in risk awareness and Corporate Governance.
Maintain documented procedures for the control of risk and provision of suitable

information, training and supervision.

Maintain an appropriate system for recording incidents and carrying out post
event checks to ascertain causes and identify preventive measures against re-

occurrence.
Devise and maintain contingency plans in key risk areas to secure business
continuity where there is a potential for an event having a major impact upon the

council's ability to function.

Maintain effective communication and involvement of all staff and members.
Monitor arrangements on an ongoing basis.

RISK MANAGEMENT AT INDUS MOTORS:

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RISK MANAGEMENT PROCESS:

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RISKS FACED BY INDUS MOTORS:

The company's activities expose it to a variety of risks: price/market risk, credit risk,
liquidity risk and fair value interest rate risk. The company's overall risk management
program focuses on the volatility of markets and seeks to minimize the effects on the
company's financial performance. The Board of Directors determines the level of risk
acceptable to the company by setting limits within which senior managers monitor the
company's operations.

PRICE/MARKET RISK:
Market risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market prices. This risk arises from adverse
movements in the price of securities in which the company trades. The company's
objective is to be aware, control and minimize this risk. The Company's principal
business involves acting as a broker and dealer in commodity and it holds positions
primarily on a back to back basis with clients and brokers. Open trading positions held by
the Company are small and largely result from client facilitation activities. Where open
positions exist the Company is exposed to adverse price movement in the price of
commodities in which it trades and holds positions.

Risk policy:
The company has a policy to create trading limits have been set that take into account
each commodity's volatility. These limits are monitored on a daily basis against both
marked to market movement and position structure.

FOREIGN EXCHANGE RATE RISK:

This risk arises from adverse exchange rate movement in the currencies to which the
company is exposed. Foreign currency risk arises mainly where receivables and payables
exist due to transactions entered into in foreign currencies. The Company manages its
exposure against foreign currency risk by entering into foreign exchange contracts where
considered necessary.

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Foreign currency risk arises mainly where receivables and payables exist due to
transactions entered into in foreign currencies. The Company primarily has foreign
currency exposures in US Dollars (USD) and Japanese Yen (JPY). The net foreign
currency exposure at June 30, 2013 is USD 12.533 million (2012: USD 0.199 million)
and JPY 613.523 million (2012: JPY 1,368.964 million).
Toyota has foreign currency exposures related to buying, selling and financing in
currencies other than the local currencies in which it operates. Toyota is exposed to
foreign currency risk related to future earnings that are exposed due to operating cash
flows and various financial instruments that are denominated in foreign currencies.
Toyotas most significant foreign currency exposures relate to the U.S. dollar.
Toyota uses a value-at-risk analysis ("VAR") to evaluate its exposure to changes in
foreign exchange currency rates. The value-at-risk of the combined foreign exchange
position represents a potential loss in pre-tax earnings. The value-at-risk was estimated by
using a variance/ covariance model and 10-dayholding period. Toyota changed the model
used for calculation of value-at-risk from "variance/covariance" method to "Monte Carlo
Simulation" method for more effectively to the risk management purposes. By using this
value-at-risk analysis (VAR), the company able to manage their global risk effectively.
For instance, the VAR of the combined foreign exchange position showed loss in pre-tax
earnings that was estimated to be RS 114.1 billion as of March 31, 2009 and RS 148.9
billion as of March 31, 2010.
Years
loss Pre Tax earning

2009
114.1 billion

2010
148.9 billion

Risk policy:
Management has set a policy that where the company contracts in a currency other than
dollar, that contract is immediately covered with respect to the dollar. The company is
also required to sell its dollar income stream for sterling on a monthly basis. The
company has receivables and payables in non-sterling currencies and the resulting
currency exposure within net assets are exposed to currency translation risk.

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INTEREST RATE RISK:

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to
changes in the market interest rates. Sensitivity to interest rate risk arises from
mismatches of financial assets and financial liabilities that mature or reprice in a given
period.
Toyota is subject to market risk from exposures to changes in interest rates based on its
financing, investing and cash management activities. Toyota enters into various financial
instrument transactions to maintain the desired level of exposure to the risk of interest
rate fluctuations and to minimize interest expense. Interest rates would be approximately
RS 110.6 billion as of March 31, 2008 and RS 55.8 billion as of March 31, 2009.
Year
Interest Rate

2008
110.6 billion

2009
55.8 billion

Risk policy:
Toyota Company manages these mismatches through risk management strategies where
significant changes in gap position can be adjusted. Toyota Company can reduce its risk
by having long term loan rather than short term on which interest rate changes more
frequently.

CREDIT/ FINANCIAL RISK:

Credit risk represents the risk of a loss if the counter party fails to discharge its obligation
and cause the other party to incur a financial loss. Toyota used various financial
instruments, in the normal course of business. These instruments were in general
executed only with creditworthy financial institutions. Virtually all foreign currency
contracts were denominated in U.S. dollars and other currencies of major industrialized
countries.
This risk arises from defaulting on a contractual obligation involving cash and cash
equivalents, deposits with banks and financial institutions, and from financial instruments
transactions. In particular, the Toyota Company operates in a market that is largely driven
by providing credit to counterparties and has an objective of being aware of, and
controlling, counterparty exposure against limits set down.

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Risk policy:
The company has credit policies and procedures in place under its Adequate Credit
Management Policy (ACMP) and this helps ensure it deals only with counterparties of
suitable credit standing. After considering counterparty's financial results and other
relevant data, all applications for credit lines are submitted to the parent company's credit
committee for formal approval, or rejection. Such lines granted are advised to the
counterparty and are reviewed at least on an annual basis. All counterparty positions are
monitored at least on a daily basis against lines granted. The company calls margin for
cover should net exposures covered by netting agreements, exceed the lines granted. It
considers its dealings with the present range commodities as one class of financial asset.
The company has determined that concentration risk can arise through exposure to any
one counterparty or counterparty group, from the industry segment those counterparties
are involved in, and from geographic region. Management, however, have in place master
netting agreements that reduce the credit exposure significantly and through the netting of
assets and liabilities in the event of a default.
The Company attempts to control credit risk by monitoring credit exposures, limiting
transactions with specific counterparties and continually assessing the creditworthiness of
counterparties.
For trade receivables, internal risk assessment process determines the credit quality of the
customer, taking into account its financial position, past experience and other factors.
Individual risk limits are set based on internal or external ratings in accordance with
limits set by the management. The utilization of credit limits is regularly monitored.
Accordingly, the management believes that the credit risk is minimal and in the opinion
of the management, the Company is not exposed to major concentration of credit risk.

LIQUIDITY RISK:
This is the risk that the company is unable to meet funding obligations as they fall due.
The company's objective is to ensure adequate financial arrangements are in place to
prevent this risk occurring.

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Risk policy:
Liquidity risk management requires maintaining sufficient cash, cash equivalent, deposits
and adequate bank facilities readily available to fund the company's day to day business.
Funding levels are reviewed at least annually by the company and account taken of both
business plans and market levels to ensure an appropriate level to support the business.
To guard against the risk, the Company has diversified funding sources and assets are
managed with liquidity in mind, maintaining a healthy balance of cash and cash
equivalents. The maturity profile is monitored to ensure adequate liquidity is maintained.
The management forecasts the liquidity of the Company on the basis of expected cash
flow considering the level of liquid assets necessary to meet such risk.

COMMODITY PRICE RISK:

Commodity price risk is the possibility of higher or lower costs due to changes in the
prices of commodities, such as non-ferrous alloys e.g. Aluminum, precious metals e.g.
Palladium, platinum and rhodium and ferrous alloys, which Toyota uses in the production
of motor vehicles.

Risk policy:
Toyota controls its commodity price risk by holding minimum stock levels. Because
prices of non- ferrous alloys change which credit risk for Toyota Company.

OPERATIONAL RISK:
This risk is the potential impact of both financial and reputational loss that could arise
from failings in operational processes, systems, or internal controls.

Risk policy:
Toyota Company constantly review the operation, process, systems or internal control.
This disciplines and awareness reduce the company risk.

POLITICAL RISKS:
The automotive industry is subject to various governmental regulations. The worldwide
automotive industry is subject to various laws and governmental regulations including
those related to vehicle safety and environmental matters such as emission levels, fuel
economy, noise and pollution. In particular, automotive manufacturers such as Toyota are
required to implement safety measures such as recalls for vehicles that do not or may not

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comply with the safety standards of laws and governmental regulations. In addition,
Toyota may, in order to reassure its customers of the safety of Toyotas vehicles, decide to
voluntarily implement recalls or other safety measures even if the vehicle complies with
the safety standards of relevant laws and governmental regulations. Many governments
also impose tariffs and other trade barriers, taxes and levies, or enact price or exchange
controls. Toyota has incurred, and expects to incur in the future, significant costs in
complying with these regulations. If Toyota launches products that result in safety
measures such as recalls, Toyota may incur various costs including significant costs for
free repairs. Furthermore, new legislation or changes in existing legislation may also
subject Toyota to additional expenses in the future. If Toyota incurs significant costs
related to implementing safety measures or meeting laws and governmental regulations,
Toyotas financial condition and results of operations may be adversely affected.

CAPITAL RESOURCES
Share capital constitutes the managed capital of the company. Called up share capital and
the profit and loss reserve on the balance sheet qualify for inclusion as financial resources
for regulatory purposes. In addition, the company can call on subordinated loans from
third parties to supplement regulatory capital if required and during the year drew down
funds under facilities provided for this purpose. The Company is authorized and
regulated by the Financial Services Authority ("FSA"), and is subject to the FSA's
minimum capital standards and requirements as applicable to UK Non ISD Firms.
These require, inter alias, that a minimum ratio of Capital available to risk weighted
Capital Requirements of 100% is maintained at all times. In addition there are
concentration and liquidity mismatch calculations and reporting requirements and is
measured on a daily basis.

Risk policy:
The Company's sets of objectives, policies and processes relating to the management of
capital, and for ensuring that the FSA's minimum capital standards are met. FSA
requirements are fully incorporated into capital management objectives, policies and
processes.

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Conclusion:
Risk management is the identification, assessment, and prioritization of risks followed by
coordinated and economical application of resources to minimize, monitor, and control
the probability or impact of unfortunate events to maximize the realization of
opportunities. Risk Management is the culture, processes and structures that are directed
towards the effective management of potential opportunities and adverse effects within
the environment. This Risk policy plays a vital role in our organization stability and
growth this policy helps the management a lot in accomplishment of the defined goals.
Thus, with the help of this risk policy we are assuming that all the risks of our
organizations will be managed to the extent. Incase if any risk re appear management will
conduct a Re-assessment of that risk and will try to mitigate that risk.

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REFERENCE PAGE:
http://www.toyota-indus.com/
http://www.toyota.com/
http://www.thefinancialdaily.com/NewsDetail/124437.aspx
http://www.wikinvest.com/stock/Toyota_Motor_(TM)/Interest_Rate_Risk
http://www.wikinvest.com/stock/Toyota_Motor_(TM)/Quantitative_Qualitative_Disclosu
res_Market_Risk
http://www.nbcnews.com/business/business-news/toyota-hold-worlds-biggest-car-recall16-years-f1C6374378
http://www.ibscdc.org/Case_Studies/Enterprise%20Risk%20Management/Enterprise
%20Risk%20Management/ERMT-006.htm
http://www.studymode.com/essays/Financial-Risk-Management-At-Toyota-1126204.html