Risk Management Global is at Ion

8/8/2019 Risk Management Global is at Ion

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Risk Management Strategies Going GlobalA Cor orate Pers ective

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Larsen & Toubro Limited

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P. S. BanerjeeP. S. BanerjeeVice PresidentVice President Corporate AccountsCorporate Accounts

&&Chief Risk OfficerChief Risk Officer

23rd September, 2008


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A great soul saw the future shaping up

It is our ability to

anticipate the futureanticipate the future

and

react accordinglyreact accordinglythat will determine our

successsuccess

G L O B A L S O U R C I N G


9/26/20089/26/2008


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Evolution

Traditionally, exports from India only meant Textiles, Spices & Commodities

With the onset of the Information Technology boom, came export of

For high-tech heavy engineering equipment & projects :

The flow was unidirectional :

From the Industrialised West to the Developing East

L&T is one Company which has rejigged the compass and reversed the



9/26/2008


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Going Global

Decision to Go Global was born out of the Companys Risk ManagementStrategy

Going Global demanded :

We expand our Risk Focus

G L O B A L S O U R C I N GG L O B A L S O U R C I N G9/26/2008


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How globalisation meant de-risking ?

Dependence on one economy made the Company vulnerable to the lows

the economy inevitably went through

e pe r ng n a quan um mprovemen n opera ona cu ure

Facilitated bench-marking against the best in the world

Heightened emphasis on the need for embracing Contemporary

Technolo and im rovin Cost Com etitiveness

Created an organisational transformation



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L&Ts efforts towards Going Global

Exported high-tech heavy engineering equipment to clients in over 30

, , , ,

Built a strong presence in the GCC countries through JVs with local

partners

Executed successfully a number of turnkey projects in the GCC countries,

some parts of Africa and South East Asia in the hydrocarbon upstream,, ,

infrastructure sector

Established state-of-the-art fabrication facilities for modular structures,

jackets and offshore oil and gas platforms at Sohar in Oman

Setting up a greenfield plant to manufacture equipment for refineries,


, ,


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L&Ts efforts towards Going Global contd.

Set up switchgear manufacturing facility for power and motor control

Built Design & Engineering Centres for hydrocarbon and infrastructure

sectors, in the U.A.E.

Established manufacturing facility for high-end switchgear in Wuxi New

District in the Jiangsu Province of China, with sourcing offices in Shanghai

Set up manufacturing facility for valves in Jiangsu and another for rubber

processing machinery in Quingdao in China

Acquired Tamco Corporate Holdings, a Malaysian company engaged in

medium voltage switchgear with manufacturing facilities and market reach


, ,


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L&Ts efforts towards Going Global contd.

Providing IT-enabled engineering services to important and demanding

, , .

Formed JVs in Kuwait, Oman, and Saudi Arabia for electro-mechanical

construction in Oil & Gas, Power & Infrastructure sectors

Forged Joint ventures with MHI for manufacture of Super Critical Boilers,

Turbines & Generators

Joint Venture formed for onshore pipeline engineering with Gulf Interstate

Engineering Company of USA

Companys turnover, slated to touch 25% in the next few years



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L&Ts Risk Management Strategies Going Global

Doing business within India remains paramount. Vision is to become an

Indian multinational not ust another multinational.

Showing a long term commitment to consolidating presence in selectgeographies through setting up of offices, entering into alliance with

, ,

wherever feasible, setting up manufacturing facility

Investment made in the Middle East for training of workmen

Building a motivated and globally benchmarked team of professionals

through providing a fast track career growth, upgradation of compensation

structure, setting up a Project Management Institute, conducting Company-

wide people engagement & leadership development programmes,international assignments and hiring Expats

Institutionalised a risk management culture and framework in the Company



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Risks of Global Business

Tough competition from internationally established players

Competitors that do not play by the rules

Regulation & Compliance

Currency Fluctuations

Abrupt changes in regulatory requirement, trade barriers, government

po c es regu a ons, res r c on on repa r a on o pro , e c

Challenges in strategic M&A deals



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Risks of Global Business .. contd

Stringent documentary discipline & contract mgmt.

Severe Safety, Health & Environment (SHE) norms in certain Countries

Complex Tax structure in different Countries

Logistic Risk

Coordinating the movement of goods through supply chains that span

Infrastructure Risk

IT resources and other infrastructure elements to support global

engineering, global operations and global logistics

Backlash against foreign entities



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Risks of Global Business .. contd

Advantages to Local Companies

Brand ima e

Tax benefits,

Reservation / Quotas for local labour force Bhumiputra. etc

Geopolitical uncertainty

Turmoil in Countries like North Africa, Iraq, Afghanistan etc.

Risk to human life & property

Risk of expropriation of Assets

Legal framework

Lack of a well-developed legal system in some countries may make itdifficult to enforce contractual rights

Possibility of severe consequential losses if contractual safeguard not


kept


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Mitigation thro a Structured Risk Management Framework

Emphasis on Enterprise-wide Risk Management

Formal Risk Management Structure

Dedicated Risk Management at Top Management level

Creation of the position of CRO

Risk Policy formulation for each business cluster

Country Risk Analysis and case-to-case clearance

Risk Register

Tracking of emerging risks

Scenario Planning



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Mitigation thro a Structured Risk Management Framework

.. Contd

Risk Management Discipline

Risk review at pre-bid stage

Risk review during project execution

Use of sophisticated tools like @Risk software

Risk MIS & Reporting



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Benchmarking

L&T - A member of Engineering & Construction Risk Institute - USA

International risk management Consulting Institute

Promulgate best practices with respect to the identification

and management of risk in the Engineering & Construction

Industry.

Hel s member com anies to assess their risk mana ement

AboutAboutAbout

ECRIECRIECRIprocesses vis--vis the Risk Management Maturity Model.

Institutionalize sound risk management to improve the

erformance and redictabilit in execution of lar e ca ital

projects


. . , , ,


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e or s a g o a v age.

that accept them.



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Documents

Risk Management Global is at Ion