Risk management policy framework CONFIDENTIAL © Mecklai Financial Services Limited No part of this document can be circulated or reproduced in any form without prior approval of Mecklai Financial Services Limited

Risk management policy - Brief  Risk’ is dynamic and subject to constant change,  What is a Risk management policy? –Streamlined document approved by board of directors  Why is it required? –To cater to specific needs of the company –Defining course of action to manage that risk –Provides a framework for corporate decision making –Provides specific guidelines for implementing FX risk management  It is a living document and should be reviewed on regular basis to ensure that it meets current corporate objectives

Risk Management Policy – outline Objective of PolicyRisk Profile / IdentificationRisk Mitigation / Risk managementImplementation / MonitoringPolicy Review

Objectives of Risk Management Policy  To make certain that the Foreign Exchange Risks are effectively identified, assessed, monitored and managed by the Company in consistent with the overall objectives  To manage Foreign Exchange transactions as a cost-containment exercise only.  To minimize the impact of Forex rate variations on INR value of the committed receipts and payments in foreign currencies while minimizing the cost of such protection.  To ensure FC funding, where availed, does not exceed the cost of Rupee funding of a comparable nature, at the time of availing.  To reduce cash flow uncertainties and improve financial decision making.

Risk Profile / Identification  Business of company  Products offered by company  Business margins of the products( product specific)  Working capital cycle  Pricing mechanism used(Product costing)  Calculating Risk Appetite (Amount of losses company can afford in FX) –For eg. different for trading and manufacturing company –Aggressive or conservative.(Jayant Agro & Siddharth color chem)

Risk Management  Various strategies that might be suitable depending on risk Appetite –Forwards –Futures –Options  Select the best solution for the company  Ensure that company is comfortable with the selected strategy

Implementation / Monitoring  Ensure that entire implementation is exact replica of Risk Management Policy –Records the exposures and hedge transactions –Reports the impact and performance of risk management process  Make the necessary modifications and changes post discussions  Run the entire system at their end(e.g MTM Sheets )  In case of any errors or bugs rectify the same and re-run again

Policy Review  Review the entire policy periodically (maybe 6 months or 1 year) Depending upon the nature of business & Markets.  Check the results in line with the objectives decided earlier  In case of any differences rework on the same  Make necessary changes  Present a review report based on above observations

Organizational Hierarchy Risk Management Committee (CFO, MD, Auditor/ Consultant) Front Office (face of company which as front end for taking hedges) Mid Office (acts as a link between front and back office, ensures proper implementation of policy, checks for discrepancies in data from back office) Back Office (deals with procuring details from sales team used in booking and acts as main source for data center)

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