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Managing in a Volatile Economy
Managing in a Volatile Economy
Managing in a Volatile Economy
Managing in a Volatile Economy
Managing in a Volatile Economy
Managing in a Volatile Economy
Managing in a Volatile Economy
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Managing in a Volatile Economy

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  • 1. Financial Risk Management In a Volatile Economy R.Kannan 20 October 2011 Annual CFO Conference – Silicon India
  • 2. Economic Environment
    • Expectations of Economic Growth had shown a declining trend in developed countries.
    • US and Europe are affected in a big way and back to old normal will take a few years
    • Corporate Sector outlook in many countries had shown a negative trend.
    • Asian countries offer promise in Economic Growth
    • Customer sentiments are very positive in the Developing countries
    • The developing countries have to take the lead in sustaining the global economic growth.
    • Focus is shifting to the Real Economy activities.
    • Regulators have started discouraging the Profiting from Derivatives and just paper transactions
    • There will be increased regulation on speculative activities.
    • Profiting from speculation will come down
  • 3. Trends
    • There will be increased volatality in the performance of Economies, Corporates, Markets and different asset classes.
    • The old method of forecasting and the available statistical models can not address all the imponderables.
    • The inflation is likely to come down to 7% and then to 5% within a year.
    • The Economic growth this fiscal would be between 8 and 8.5% and depending on global developments, the prospects for the growth will evolve in future.
  • 4. Managing Volatility
    • Challenges for CFO’s are many
    • Managing a multi country operation
    • Main challenge is how to manage volatility in Demand, Costs of inputs and managing Cash.
    • Robust Financial and Performance Planning
    • Ensuring predictable performance
    • Measurement of Risk
    • Be ready with an appropriate response for various types of risks.
    • Introduction of new reporting standards by regulatory authorities
  • 5. Strategies to be followed
    • Develop a highly flexible organisation and Financial Architecture.
    • Reduce the level of Fixed costs in the system and increase the variable costs.
    • Strategic outsourcing of activities and follow asset light strategies.
    • Focus on Cash generation
    • Focus on Core business and reduce the income from financial and derivative transactions.
    • Scenario planning and be ready with response for all possible scenarios.
  • 6.
    • Hedge the input costs and output price at the budgeted levels.
    • Monitoring of performance at regular intervals including daily, weekly and monthly depending on the need.
    • Monitor supplier and Customer performance closely.
    • Develop a good risk management system and monitor all types of risks continuously.
    • Introduce flexibility into the budgeting system.
    • Review the ongoing Projects and Capital expenditure progammes at regular intervals and assess the need for course correction.
  • 7. Thanks

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