Financial Risk Management In a Volatile Economy R.Kannan 20 October 2011 Annual CFO Conference – Silicon India
Economic Environment <ul><li>Expectations of Economic Growth had shown a declining trend in developed countries. </li></ul...
Trends <ul><li>There will be increased volatality in the performance of Economies, Corporates, Markets and different asset...
Managing Volatility <ul><li>Challenges for CFO’s are many </li></ul><ul><li>Managing a multi country operation </li></ul><...
Strategies to be followed <ul><li>Develop a highly flexible organisation and Financial Architecture. </li></ul><ul><li>Red...
<ul><li>Hedge the input costs and output price at the budgeted levels. </li></ul><ul><li>Monitoring of performance at regu...
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Managing in a Volatile Economy

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Managing in a Volatile Economy

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

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