in a Dynamic Environment - Tata Consultancy Services

62
Annual Report 2008-09
� The Company has used various types of
foreign currency forward and options
contracts to hedge the risks associated
with fluctuations in these currencies. The
Company has also noted that the contour
of exchange risk exposure now is quite
different from what it has been in
previous years, as cross currency
movements have added an additional
dimension of volatility
� The Company has strengthened the
existing policies and processes for the use
of financial derivative instruments
consistent with its risk management
strategy and these strategies are
reviewed by a Risk Management Board
on a quarterly basis. Also, the Company
has developed software products to
monitor, manage and report the
exposures related to hedging transactions
on a daily basis.
2.2.2 Counterparty risk in treasury operations
� The treasury operations of hedging have
to be conducted through banks
mandated by the RBI as ‘authorised’ for
the purpose of such transactions. In the
recent economic and banking turmoil, all
leading banks have been affected in
varying degrees
� In order to protect itself against possible
default by the counterparties for these
hedging transactions, TCS has been
monitoring counterparty health,
�
diversifying the risk by having multiple
banks with whom such transactions are
undertaken and also monitoring limits
with each of them dynamically
Detailed records are maintained of all
such forward and options contracts and a
daily P&L statement is also prepared and
reviewed by senior management.
2.3 Regulatory & Compliance related risk
� The Company has a global footprint and
as it increases its global reach and
operations the risk of ensuring 100%
compliance with the regulations and laws
in the various jurisdictions where it has a
presence has increased
� To mitigate this risk, the Company has
established a separate office under a
senior and experienced Chief Compliance
Officer and has also put in place an
institutionalized structure to ensure 100%
regulatory and legal compliance across
the globe. The Chief Compliance Officer
has a team of senior persons from all
relevant functions as part of his team to
ensure compliance with all laws and
statutory requirements in these
2.4
countries. The use of local managers as
well as consultants, auditors, lawyer’s
specialists and experts in these countries
where we have a presence is encouraged
to ensure 100% compliance.
Strategic Risks
2.4.1 Global Market Risks
� With economic slowdown, coupled with
consequences of credit squeeze across the
globe and the consequent increase in
bankruptcies, M&A’s and Governmental
bailouts of global organizations in the
developed economies , the contours for
conducting business globally is continually
changing
� TCS has adapted its agile approach,
customer reach and market presence, to
effectively create proactive opportunities
in such dynamic scenarios – where vendor
consolidation, cutbacks in discretionary
spending and increased demands for
more services has become commonplace
� The approach adopted by the Company
involves effectively leveraging its market/
product/customer relationships built over
many years, to work closely with its clients
– to help them address their business
problems and to enable them to meet
their business objectives. TCS does this by
bringing all the innovation, domain
knowledge and technical expertise of the
entire organization to bear on customer
requirements and needs so that we can
provide clients with value-added
solutions.
2.4.2 Reputation risks
� The Company has recognized that its wide
global presence has to be strengthened
by appropriate brand building. It has been
investing in building the brand of
‘Experience Certainty’ through multiple
means
� As TCS is part of the Tata Group of
Companies and is a signatory of the Tata
Brand Equity – Brand Promotion (BE-BP)
agreement, it is governed by strict
standards in its communications as well
as use of the Tata Brand and ensures
compliance with the same. Strong