Ensuring Effective Risk Management

Home > Integrated Reporting > Ensuring Effective Risk Management

RISK MANAGEMENT

ENSURING EFFECTIVE RISK MANAGEMENT

Effective risk management helps us manage the impact of events and attain business objectives. We ensure this with our robust risk management framework and a holistic approach of continually identifying, monitoring, evaluating and managing risks. Amidst the rising geopolitical tensions and supply chain issues globally, we are bringing more agility to tackle emerging risks and capitalize emanating opportunities.

Risk Management Framework

We have well-defined framework and procedures for Enterprise Risk Management (ERM), prepared under the supervision of the Executive Board, covering the areas of information security, operations, delivery, and key support functions. It includes risk identification, analysis, response, tracking, and management discussion and mitigation.

Our respective functions and project teams maintain risk registries, which are centrally reviewed and periodically monitored by compliance and governance teams responsible Our respective functions and project teams maintain risk registries, which are centrally reviewed and periodically monitored by compliance and governance teams responsible

We ensure effective ERM through a robust governance mechanism covering Chief Information Security Officer (CISO), Chief Information Officer (CIO) and Engineering and Business Excellence team, (EBE) who work together with the Executive Board.

Key Risks and Mitigation Actions

Risks

Foreign currency fluctuation

International operations account for a substantial part of our revenues, posing a threat of impact on profitability due to unfavorable movement in foreign currency.

Mitigating Actions

We manage FX risk in two ways:
- Natural Hedge – Matching of payable and receivables in foreign currency to neutralize swings
- Simple Derivatives – Using plain vanilla forward exchange contracts with maximum one-year residual life and structured ladder form for covering probable transaction/inflows

Customer credit

Inability to obtain payments owed by our customers can impact our working capital cycle and lead to loss.

We maintain short bill and collect cycles, with a strong focus on collection resulting in a low debtor days of 86 as on March 31, 2023
We assess customer creditworthiness and adhere to contractual terms for timely collections

Availability of credit and liquidity management

Inability to maintain optimum liquidity level may put us at risk of meeting future cash and collateral obligations.

We focus on monitoring our positions and maintain adequate sources of financing through various banks under multiple banking arrangements
We have access to undrawn borrowing facilities

Concentration of revenues

We are dependent on a few customers and geography for most of our revenues. Inability to attract new or retain existing customers, or any unfavorable macro scenario in our key target market may impact revenues.

Mitigating Actions

Majority of our revenues come from the US. However, sustained growth in other regions has led to decline in US revenue share
We maintain close relationships and sustained engagements with customers to understand their needs
We leverage our extensive portfolio of offerings to cross-sell and upsell to existing customers as well as add 31 new clients

New and emerging technology disruption

The IT industry is rapidly evolving, and inability to build new technology capabilities may impact new business opportunities.

We have established competence in several next-generation technologies like blockchain, AI, drones and robotics, and EDGE computing among others
We have dedicated Centers of Excellence (CoEs) and enter into collaboration with globally leading firms to further build niche skills
We constantly run upskilling and reskilling programs to make employees future-ready

Profitability and sustenance of the business

Increase in wages and inability to compute right contract pricing through various cost estimation may impact profitability.

A large business is executed through offshoring from India, ensuring the advantage of lower wage costs
Expansion in tier II cities where people costs are lower further adds to low-cost advantage
We use the expertise of our team along with technology tools for cost estimations and contract pricing
Our ability to deliver high quality solutions ensure better pricing power

Business expansion

Inability to bag new orders and enhance people's bandwidth will result in stagnancy. We are also faced with the challenge of contractual clauses which may restrict our ability to offer services to different customers.

We continually enhance people assets (by attracting and retaining talent) to execute projects. In FY 2022-23, 749 people were added
We have successfully enabled clients to achieve tangible outcomes with our solutions, leading to sustained repeat and new orders
Our diverse technology and vertical capabilities enable participation in several new orderings. In FY 2022-23, we acquired Sri Mookambika Infosolutions which strengthened our healthcare vertical and aligns well with our Product Engineering Services business

Talent availability

We are dependent on their talent to deliver solutions to clients. Inability to attract and retain talent may impact business opportunities.

Mitigating Actions

We are based in India, giving us access to a large pool of talented engineers. Our robust talent management program enables hiring right talent and skilling them
We offer learning and development programs for skilling and ensuring enhanced career opportunities
We run several wellness programs, offer benefits and industry-standard compensation to ensure higher retention

Optimal resource utilization

Inability to maintain high resource utilization and productivity will impact profitability.

We consistently achieve high resource utilization by promptly transitioning employees from completed projects, accurately forecasting demand and deploying the right resources to right projects
Increased demand for IT products and services will further help improve utilization as more business opportunities come

Contractual commitments and project delivery challenges

Inability to maintain contractual commitments may lead to termination of agreements and future business opportunities.

We ensure high-quality control and process execution standards, effective resource utilization, sustained client engagements and high productivity level to deliver projects
Our solid team of engineers and partnerships with leading global vendors enables us to deliver high-quality products and services as per terms and on a timely basis

Compliance with local legislation

Non-compliance with the local laws of the region in which we operate may lead to litigation or cancellation of licenses.

Mitigating Actions

We have stringent policies and checks and an integrated compliance tool which ensures good governance and compliance with local laws supported by timely reminders and alerts
We consult and seek guidance from professional experts in certain cases for correct interpretation of local laws

Restriction on immigration or work permits

We are dependent on our Indian people resources to deliver onsite support to clients. Any geopolitical tension or unfavorable change in immigration laws may impact project delivery

The present immigration scenario is mostly conducive in the countries where we operate. We keep track of the local immigration laws including for any regulatory changes/events due to geo-political reasons, to plan our activities
We monitor the time and effort spent by our employees onsite to avoid tax incidences

Data privacy and information security risks

Inability to ensure the privacy of customer data and protect systems or clouds from cyberattacks may put us at risk of litigation.

We have policies and procedures for information security and data protection (ISO 27001 and ISO 27701 compliant) and for data privacy comply (aligned to GDPR and CCPA)
We adhere to stringent regulations for handling customer data, which all employees follow along with a written confidentiality agreement. Further, all employees and partners need to attend mandatory security and privacy awareness programs to ensure compliance

IP risks

Inability to protect our IPs may lead to opportunity losses. Further, we also face risks of non-compliance with third-party open-source software terms or IP infringement claims against our solutions, which may lead to discontinuance of service to clients and fines.

We only use licensed third-party commercial software (monitored by in-house team) to avoid issues of infringement, warranties or other contractual protections. Open-source tools are used in certain cases with prior verification and approval by IT/legal team
We ensure developing novel solutions, and protect our technical know-how by registering intellectual property and by undertaking confidentiality obligations from all stakeholders involved in projects
We take necessary insurance to mitigate any eventualities related to IP risk
All Happiest Minds are made aware of the IP protection and sign IP declaration when joining

Strategy for Achieving Vision and Maximizing Value Creation