Risk Management Policy
Introduction
Orbit Electromech India Private Limited is engaged in the business in the field of engineering, contracting including the design, manufacture, job workers, construction, erection, alteration, repair and installation of plants, buildings, structure, ways, works, systems and mechanical, electrical and electronic machinery, equipment, apparatus, devices, plastic molding and plastic products in India or abroad. ‘Risk’ in literal terms can be defined as the effect of uncertainty on the objectives. Risk is measured in terms of consequences and likelihood. Risks can be internal and external and are inherent in all administrative and business activities. Every member of any organization continuously manages various types of risks. Formal and systematic approaches to managing risks have evolved and they are now regarded as good management practice also called as Risk Management. ‘Risk Management’ is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of uncertain events or to maximize the realization of opportunities. Risk management also provides a system for the setting of priorities when there are competing demands on limited resources.
Effective Risk Management Requires
# Strategic Thinking
# Far-sighted and Active approaches
# Balance between cost of managing risk and the anticipated benefits, and
# Periodic risk assessment
In today’s challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks inter alia are: Regulations, competition, Business risk, Technology obsolescence, return on investments, business cycle, increase in price and costs, credit risk, limited resources, retention of talent, etc.
Police Review
The provisions of Section 134(3)(n) of the Companies Act, 2013 necessitate that the Board’s Report should contain a statement indicating development and implementation of a risk management policy for the Company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the Company. In line with the above requirements, it is, therefore, required for the Company to frame and adopt a “Risk Management Policy” (this Policy) of the Company. The main objective of this Policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the Company’s business. In order to achieve the key objective, this Policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk-related issues.
Risk Management Framework
3.1 Risk Management Structure:
The Board of Directors shall periodically review the risk management policy of the Company and evaluate the risk management systems so that management controls the risk through a properly defined network.
Head of Departments shall be responsible for implementation of the risk management system as may be applicable to their respective areas of functioning.
3.2 Risk Management Program:
The Company’s risk management program comprises a series of processes, structures and guidelines which assist the Company to identify, assess, monitor and manage its business risk including any material changes to its risk profile. To achieve this, the Company has clearly defined the responsibility and authority of its Board of Directors to oversee and manage the risk management program, while conferring responsibility and authority on the Company’s senior management, to develop and maintain the risk management program in the light of the day-to-day needs of the Company. Regular communication and review of the risk management practice provides the Company, important checks and balances to ensure the efficacy of its risk management program.
3.3Risk categories & Mitigation Measures:
The following broad categories of risks have been considered in the risk management framework:
Technology Risk: Unforeseen changes in regulations, standards and technology are the biggest risks, though by their very nature, such risks are difficult to quantify. Changes in the regulations pertaining to PKI and e-security may render some of the products irrelevant to the customer and can cause a dent in future revenue.
Mitigation: While compliance is a major selling point for our products, almost all of our products also address very important security needs for the customer. The management also plays an active role in monitoring e-security regulations and making appropriate changes to the product base to keep them relevant. Major technological breakthroughs that render current cryptographic techniques for protecting information obsolete are another concern for long-term business continuity. However, the senior management is constantly on guard for such indicators.
Equipment Break Down threats: As our machines are used on a continuous basis so sometimes there may be a breakdown.
Mitigation: Pre-use check should be conducted by the users. Electrical equipment subject to regular safety inspection and test should be conducted from time to time. All tested appliances to be labeled showing date tested/next test date. Fixed Installation testing (every 5 years) should be conducted. Recognized Competent contractors should be appointed for repairs/maintenance. However, this risk is mitigated by constantly re-engineering the products in response to such threats.
Company size and resource risk : Certain problems are faced by the Company in taking advantage of large opportunities due to Company size and resource limitations.
Mitigation: Such problems are addressed through active partnership with large vendors and system integrators. Leveraging such opportunities through our partners keeps us relevant in the market and provides brand visibility.
Receivables Risk: Since the Company is engaged in the supply of various switch gear panels products and other such products, risks associated with timely collection of payments from the customers will always be a concern. The Company enters into Service Agreement with its customers, where terms of payment and the payment process adopted by the customer are clearly defined. Any deviation from the terms of agreement or delay in receiving payments from customers owing to some delivery/product issues is a major risk.
Mitigation: The management takes stock of the receivables, exceeding beyond 120 days and takes necessary measures to recover payments from customers. Sending regular intimations to customers for recovery of dues or discontinuing services are some measures adopted by the Company depending upon the situations. Efficient receivables collection process has helped minimize this risk to a large extent.
Human Resource Risk: Employability risk, viz., attracting the right talent for the right role and attrition risk are two human resource risks faced by the Company. The attrition risk is not just restricted to losing talent (after providing them all the necessary training for the job) but additionally the Company has to absorb the attrition cost as well.
Mitigation: The staff compensation levels are almost on par with the best in the domestic industry. All efforts are made to ensure an innovative work environment to all our employees. The senior management strives to keep the attrition levels under reasonable control.
The Company has been continuously strengthening its internal HR processes to hold on
to the critical employees and create a reserve of abundant talent.
Oversight And Key Management Practices
A. Board
The specific objectives of this Policy are:
# To ensure that all the current and future material risk exposures of the company are identified, assessed, quantified, appropriately mitigated, minimized and managed i.e. to ensure adequate systems for risk management.
# To establish a framework for the company’s risk management process and to ensure its implementation.
# To enable compliance with appropriate regulations, wherever applicable, through the adoption of best practices.
# To assure business growth with financial stability.
B. Senior Management
The Company’s senior management is responsible for designing and implementing risk management and internal control systems which identify material risks for the Company and aim to provide the Company with warnings of risks before they escalate. Senior management must implement the action plans developed to address material business risks across the Company. Senior management should regularly monitor and evaluate the effectiveness of the action plans and the performance of employees in implementing the action plans, as appropriate. In addition, senior management should promote and monitor the culture of risk management within the Company and compliance with the internal risk control systems and processes by employees. Senior management should report regularly to the Board regarding the status and effectiveness of the risk management program.
C. Employees
All employees are responsible for implementing, managing and monitoring action plans with respect to material business risks, as appropriate.
Review Of Risk Management Program
The Company regularly evaluates the effectiveness of its risk management program to ensure that its internal control systems and processes are monitored and updated on an ongoing basis. The division of responsibility between the Board, audit committee and senior management aims to ensure that specific responsibilities for risk management are clearly communicated and understood. The reporting obligations of senior management and audit committee ensure that the Board is regularly informed of material risk management issues and actions. This is supplemented by the evaluation of the performance of the risk management program and audit committee, senior management and employees responsible for its implementation.