Policy - Risk Management
Risk Management Policy
The company’s Risk Management Policy is a robust mechanism to safeguard its resources and activities, from various risks that may have adverse impact on achievement of organizational goals
This policy shall comply with the amended Clause 49 of the Listing Agreement which requires the company to lay down procedure for risk assessment and procedure for risk minimization.
"Clause 49 VI (C): The company through its Board of Directors shall constitute a Risk Management Committee. The Board shall define the roles and responsibilities of the Risk Management Committee and may delegate monitoring and reviewing of the risk management plan to the committee and such other functions as it may deem fit. "
- Role of the Board
- Board is responsible for framing, implementing and monitoring the risk management policy of the company as well as for reviewing the policy.
- Board would appoint the Risk Management Committee and define the roles and responsibilities of that committee and may delegate the risk management function to the Committee and such other functions as it may deem fit.
- Ensure risk management is integrated into board reporting and annual reporting.
- Role of Risk Management Committee
The Board appoints the committee, comprising of both directors and senior management, chaired by a director.
The first committee shall have the following as its members:
- Dr.Amarnath Gupta, CMD (Chairman)
- Mr.T.V.Chowdary Executive Director (Member)
- Mr.Y.Durga Prasad ,President-Production (Member)
- Mr.C.Subba Rao, CFO (Member)
- Meetings and quorum
The committee shall meet at least once in a year.
The quorum of the meeting shall be two members with at least one director.
- Periodically assess risks affecting the business operations and review key leading indicators
- Periodically review the risk management processes and ensure that the company is prudently balancing between risk and reward.
- Coordinate its activities with the Audit Committee in instances where there is any overlap with audit activities (e.g. internal or external audit issue relating to risk management policy or practice).
- Report to the Board with respect to risk management and minimization procedures.
- Risk identification
From own experience and based on knowledge of industry and environment, the company shall make a checklist of various kinds of risks which may include
- Internal risks
(internal to the company, generally controllable)
- - Handling hazardous chemicals
- - Machine breakdown
- - Technical failure
- - Employee absence
- Strategic risks
(major decisions of the company)
- - Investment in new business
- - Development of new product
- External risks
(beyond company borders, generally uncontrollable)
- - Environmental
- - Political
- - Force majeure
- - Regulatory
- - Financial: interest rate, scarcity of funding, etc
- Risk analysis
Analyse the causes and sources of risks
Also anticipate the consequences of risks
- Risk assessment
Estimate the magnitude of damage in terms of value
Classify the estimated damage whether it is
- - Devastating
- - Major
- - Tolerable
- - Minor
- Risk mitigation
- Risk avoidance
e.g. Avoiding further supplies to a customer who failed to pay for the previous supplies
Risk / reward balance to be kept in mind – avoidance of sales means losing potential profit
- Risk transfer to third party
Obtaining insurance cover, hedging the forex exposure, etc.
- Risk reduction
e.g. linking the selling price to cost of raw materials (price escalation clause)
- Risk acceptance
e.g. continuing the supplies even if cost is more than selling price, to avoid black-listing
Employees noticing the risks and potential risks shall bring them to the notice of unit head for appropriate risk mitigation action. Unit head, where he can not address the risks, shall report them to company management and so on to Risk Management Committee, Audit Committee and Board.
Reporting shall comply with company law, SEBI regulations and other statutes as may be applicable.