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  • DRM Assignment RISK Synopsis

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    This document discusses the risks faced by the Indian IT/ITeS industry from operating globally. It identifies four main categories of risk: billing risk from over-reliance on few clients or geographies; financial risk from currency fluctuations; legal and regulatory risk from varying laws in different countries; and environmental risk from political instability. The document then outlines a risk assessment project that will analyze risks across selected IT companies, compare hedging practices used, and identify hedging instruments used for specific risks.

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    IT companies in India

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    This document discusses the risks faced by the Indian IT/ITeS industry from operating globally. It identifies four main categories of risk: billing risk from over-reliance on few clients or geographies; financial risk from currency fluctuations; legal and regulatory risk from varying laws in different countries; and environmental risk from political instability. The document then outlines a risk assessment project that will analyze risks across selected IT companies, compare hedging practices used, and identify hedging instruments used for specific risks.

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    © All Rights Reserved
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    20 Ansichten2 Seiten

    DRM Assignment RISK Synopsis

    Hochgeladen von

    Sandeep
    This document discusses the risks faced by the Indian IT/ITeS industry from operating globally. It identifies four main categories of risk: billing risk from over-reliance on few clients or geographies; financial risk from currency fluctuations; legal and regulatory risk from varying laws in different countries; and environmental risk from political instability. The document then outlines a risk assessment project that will analyze risks across selected IT companies, compare hedging practices used, and identify hedging instruments used for specific risks.

    Copyright:

    © All Rights Reserved
    Als PDF, TXT herunterladen oder online auf Scribd lesen
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    von 2

    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

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