RISK MANAGEMENT FRAMEWORK
Effective risk management enables us to implement our strategy and deliver long-term value to all our stakeholders. Over the past year, we worked to reduce our exposure to risks and introduce more risk management practices to increase resilience. Risk management practices will lead us to sustainability in operations and improvement in profitability.
Our approach of integrated quantitative risk analysis in day-to-day activities and performance management of the company guides our corporate decision-making. Our priority continued to be to safeguard our supply chains, customers and communities we operate within, while we ensured uninterrupted operations and sufficient liquidity within the company.
R1: Talent Management - Recruitment and retention
Risk definition
- There has been an increase in demand for skilled talent in the industry, leading to dearth of talent for skilled professionals
- Loss of talent to competitor and inability to ensure optimal staffing levels may lead to operational / delivery issues
Risk drivers
- Development of identified successors
- Identification of talent pool
- Engaging and developing talent
- Adequate rewards for talent
Implication for value creation
- Loss of talent to competition
- Knowledge and skill gap
- Loss of intellectual capital
- Missed opportunities and stagnation
- Disruption of operations
- Company’s information moves out with talent loss to competition
Mitigating controls
- Talent Management process developed and implemented
- Critical positions identified
- Successors identified and development plan for successors is in progress
- Established a talent readiness assessment framework
- Process automation initiated to reduce dependability
R2: Cyber and information risk: Cyber Attacks / Cyber security threats, Vulnerability Management & Application Security and inadequate data governance procedures
Risk definition
- Cyber-attacks are a potential threat on the IT resources, resulting in theft, damage or sabotage and disruption / loss
- Inadequate business continuity and disaster recovery plans resulting in business disruption or delay in service restoration in the event of IT disaster may lead to unavailability of systems that are required for the normal functioning of the business
- Inability to generate / retain / retrieve information timely, competition intelligence, dashboards, etc., due to sub-optimal utilisation of systems, absence of effective document management system and poor quality of data may hamper decisionmaking and operations
Risk drivers
- Limited resources and infrastructure
- Evolving threat landscape
- Inadequate security controls
- Lack of training and skills
- Inadequate plan testing and exercises
- Limited communication and awareness
- Incomplete documentation and document management
Implication for value creation
- Disruption in operations
- Regulatory consequences
- Damage of customer trust and reputation
- Financial loss
Mitigating controls
- Governance for ITSM, IT project management, and IT incident management has been established
- The principle of ‘Secure by Design’ has been integrated into all development activities
- A dedicated leadership within IT has been formed to strategically focus on cybersecurity, SAP, and development projects
- A Cybersecurity Maturity Assessment was conducted, and a three-year roadmap has been developed
- An AI-ML-based Endpoint Threat Detection & Response system has been implemented
- A robust system for managing privileged accounts has been established
- Vulnerability Management processes have been put in place, including assessments and penetration testing on critical business applications, and governance for Vulnerability Management has been implemented
- IT and cybersecurity policies have been revised and rolled out
- Regular cybersecurity awareness sessions and phishing simulations have been conducted to enhance staff vigilance and resilience against evolving cyber threats, with staff receiving interactive training
R3: Financial performance risk affecting margins
Risk definition
The company may face a risk of inadequate gross margins on the products manufactured and businesses / subsidiaries with low margins may lead to lower EBITDA and PAT.
Risk drivers
- Market volatility
- Increase in cost of commodity prices
- Cost inflation
- Pricing pressure from the market
- Deterioration in operating efficiency
Implication for value creation
- Financial performance
- Competitive positioning
- Investor confidence
- Long-term sustainability
- Fluctuating EPS
Mitigating controls
- Enrich product mix for higher margins
- Innovative products introduction with better efficiency to generate premium in market
- Enhancement in volumes through campaigns and awareness
- Penetration of untapped territories
- Debottlenecking of manufacturing capacities
- Conduct benchmarking exercise to control identify and control leakage areas
- Enhanced governance via focussed teams to monitor costs and Working Capital
- Focus on value engineering to make the products cost competitive
R4: Delay in commercialisation of new technologies
Risk definition
In the product development cycle, the transition from the R&D phase to the commercialisation phase may get delayed and the timeline for successfully launching and monetising the technology may further be extended.
Risk drivers
- Complex regulatory requirements and intellectual property rights
- Competitive landscape
- Ineffective targeting and segmentation
- Resource constraints
Implication for value creation
- Revenue loss
- Reputation damage
- Competitive disadvantage
- Loss of investor confidence
Mitigating controls
- Develop KPIs to accelerate new products to the market
- Implement a robust intellectual property strategy
- Conduct pro-active market research and analysis
- Enhance technical expertise
R5: Rise in procurement cost and heavy dependence on limited suppliers
Risk definition
There is a risk of potential increase in expenses related to sourcing materials, goods or services, coupled with a high reliance on a limited number of suppliers. This may limit the negotiation power of the Company and further make it vulnerable to price fluctuations and supply disruption.
Risk drivers
- Supplier concentration
- Currency fluctuation
- Inflation
- Supply and demand imbalance
- Global commodity shortage
Implication for value creation
- Escalation of costs
- Limited negotiating power
- Higher exposure towards supply chain disruption and subsequent delays
- Affecting production plan
Mitigating controls
- Leveraged tools to track direct expenditure
- Strategic partnership with suppliers for key purchase category
- Introducing alternate suppliers and category management to keep track of overall spend
- Regular monitoring of raw material price index to facilitate timely purchase decision
- Consistently evaluating negotiation tools; for example – E Auction
- Sufficient stocking of key raw material(s)
- Hiring category experts for cost reductions
R6: Geopolitical risk
Risk definition
The company has subsidiaries in numerous geographies across North America, EMEA and Asia Pacific and is exposed to risks on account of external factors originating from geopolitical events which may adversely affect the Company’s international operations.
Risk drivers
- Volatile international commodity prices
- Political instability/conflict/global power shifts
- Regulatory changes/policy uncertainty/ protectionist policies
- Trade disputes and tariff barriers
- International sanctions and embargoes
- International financial turmoil
Implication for value creation
- Impairment of value of investments in international subsidiaries
- International Go-To Market (GTM)/ expansion decisions
- Disruption in supply chain and increase in costs
- Abandoned, hold or cancelled projects and orders
Mitigating controls
- Stringent governance oversight for high-risk countries and for exports
- Diversified spread of international operations and exports
- The Company has put in place, alternate strategic sourcing options to minimise the impact.
- Increased local sourcing share
