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RISKASSESSMENTand RisksfacedbytheIT/ITeS

HEDGINGSTRATEGIESof Industry
ITCOMPANIESinINDIA Withcompaniesshiftingtoaglobal
deliverymodel,theyreexposedto
differentenvironments,cultures,legal
andpoliticalsystems.Theimportanceof
riskmanagementisofutmost
importanceinsuchascenarioand
companieshavetodeployavastarray
ofriskmanagementpracticesto
safeguardtheinterestsofallthe
stakeholders/shareholders.Thevarious
riskswhichfallintothe
above-mentionedcategoriescan
broadlybeclassifiedunder4types.

ABOUTTHEINDUSTRY
TheITindustryworldwideisa$124-130
billionmarketandtheIndianITindustry
isthebiggestcontributortothissector,
accountingfor67%oftheworldwide
BillingRisk:Billingriskreferstothe
market.TheIndianlandscapemakesit
risksinvolvedinnegotiationswiththe
possiblefortheITindustryinIndiato
clients.Themajorsourcesofbillingrisk
competeonalow-costbasis.These
areduetoover-concentrationin
factorshaveledIndiatobeamajor
verticals/geographies/clients/service
sourceforITandITeSoutsourcingin
offerings.Foreg.ifafirmderivesmost
theworldwiththemajorrevenue
ofitsrevenuesfromafewclients,and
comingfromtheUSA(about2/3rdof
negativeimpactontheclientsbusiness
thetotalITexportrevenue).To
willalsohaveanadverseimpactonthe
diversifytherisktiedtojustone
ITfirm.Mostoftherisksinvolvedin
currency,recentlyIndianITcompanies
BillingRiskcanbemitigatedthrough
arelookingtodiversifyintonewer
adequatediversificationlikehowfirms
geographiesinAsia-Pacific,MiddleEast
arenowenteringintonewer
andAustralia.
geographiestoreduceover-relianceUS
companies.

FinancialOperationsRisk:Since personnel,whichimpacttheirmargins.
majorityoftherevenueforIT
companiescomefromexports,the
companiesarehighlysensitiveto Scopeoftheproject
exchangeratefluctuations.Briefly,most
ofthecompaniesemployforward Risksacrosscompanies-Theprimary
contractsandoptionstohedge stepistoidentifytherisksassociated
currencyrisks.Therearevarious witheachofthecompaniesselected
hedgingtoolsavailabletothe (mainly,financialrisks)
companiestohedgerisksinvolving
theirfinancesandtheprojectaimsto Companieswewillanalyse:
coverthisaspectinmoredepthasthis
wouldbetheprimaryareaoffocusfor
theproject

LegalandRegulatoryRisk:Companies
havetopaydueconsiderationstothe
legalframeworkandcontractsystems
HedgingPractices-Tocompareand
ofthegeographieswheretheyoperate.
contrastthedifferenthedgingpractices
Also,inmanycases,theITcompanies
wouldrequireIndiannationalstowork
HedgingInstruments-Toidentifywhat
on-siteforaportionoftheservice.So,
instrumentsareusedtohedgewhich
thecompaniesneedtopayattentionto
typeofrisk
thework-permitsandvisa/immigration
regulationsofdifferentcountries.

EnvironmentalRisk:Thebiggestfactor
PreparedBy:
withinthiscategoryispoliticalrisk.With
recenteventslikeBrexitandPresident
Trumpsplanstolimitimmigration,IT SectionA Group5
firmshavetoremainvigilanttovarious
politicalfactorswhichcannotonly Sumedh Sapre 16P056
Sandeep 16P048
reducetheirrevenuesfromacertain
Utkarsh Parekh 16P096
country,butcouldalsoterminatetheir
Anil Kamath 16P009
businessinsomecountries.Employee Kamalika Poddar 16P025
expensesisamajorcomponentisthe Prerna Pandey 16P039
coststructureofanycompanyand

thesecostsaresubjecttoinflationary
pressures.Andtobeonthe
cutting-edgeoftechnology,ITfirms
havetoinvestmoreinmanpower
developmentandhiringofkey