Enterprise Risk Management at Digital Globalsoft

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Excerpts

Digital faced competition from formidable players like domestic software companies, large international players and consultancy firms. The risks associated with fixed price contracts included underestimation of contract values and getting locked at lower sales realizations, cost overruns, delay in completion of projects, lack of ability to plan and meet deadlines, failure to meet contractual obligations and meet customer deadlines, etc. In 2001-02, fixed price contracts, accounted for around 11% of the total business. All fixed price contracts were monitored regularly to ensure that contractual obligations and project deadlines were met...

Digital had operations in several foreign countries and had set up new proximity centers. The company lacked experience in facilities management outside India. Digital was in the process of streamlining its processes and administrative controls. It had concluded a detailed internal audit of US operations to ensure that all checks and balances were in place and were followed. In Digital's business, the risk of obsolescence of infrastructure was high. Digital continuously tracked and monitored technological developments and ensured that it had state-of-the-art technology to support the different business units and departments...

Digital might face the risk of legal action if it did not comply with all prevailing domestic and international rules and regulations. Digital had an in-house legal counsel to ensure compliance with all rules, regulations and procedures in India and abroad...

Reputation risks might arise if the actions of any employees or directors of the company were unethical. Digital had formulated and articulated a well-defined Code of Ethics, which had been circulated to all employees and directors...

Digital faced potential risks arising out of changes in the currently favorable government policies towards the software sector. Digital believed that such policies would continue to provide further fillip and encouragement to the software sector, regardless of the political party in power...

The employees, management and the entire infrastructure and property of the company at large were exposed to risks such as accidents, natural calamities like earthquakes, floods, and eventualities like fire in premises...

Foreign Exchange Risk
Digital earned revenues in various foreign currencies, with earnings in US dollars being the highest. Hence, the company was exposed to foreign exchange rate fluctuations. Digital constantly tracked and monitored the foreign exchange markets and had an efficient foreign exchange management system in place. Digital selectively used forward contracts to hedge such risks...

Exhibit I: Digital Performance Highlights
Exhibit II: Digital Break-up of Compaq/Non-Compaq Business
Exhibit III: Digital Software Services Segment
Exhibit IV: Digital Geographical Segments
Exhibit V: Digital Training Details