Enterprise Risk Management at Infosys

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Case Details:

Case Code : ERMT-006
Case Length : 15 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Toyota
Industry : Auto and Ancillaries
Countries : Global

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

Infosys, one of India's most admired companies was also one of the fastest growing firms in the country. The company's sales had risen from less than Rs.15 crores in 1993 to Rs.2600 crores in 2002. During 1999-2002, despite the tech slowdown, turnover had grown at a rate of 72% per annum and profits at 81%.

Infosys believed its business model rested on four pillars – Predictability, Sustainability, Profitability and De-risking. De-risking enabled Infosys to react effectively to changes in the business environment. It facilitated the generation of a predictable and sustainable revenue stream for the company.

Infosys used a comprehensive and integrated risk management framework. Prudential norms aimed at limiting exposures were an integral part of this framework. Infosys used formal reporting and control mechanisms to ensure timely information availability. These mechanisms were designed in such a way that risks at the transactional level were identified and steps were taken towards mitigation in a decentralized fashion.

The board of directors was responsible for monitoring risk levels. The management council ensured implementation of mitigation measures. The audit committee provided feedback on the overall direction of the risk management policies.

Risk Identification

Infosys had listed what it believed were some of the important risks it faced.

Concentration risks
Infosys had taken various steps to prevent excessive concentration in any one vertical, technology, client or geographic area.

Service concentration

Infosys had an array of service offerings across various horizontal and vertical business segments.

E-business exposure

Infosys' exposure to high-risk Internet start-up companies had been reduced significantly following the dotcom collapse. In view of this, the management believed this risk was not too high...

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