Our Financial Risk Advisory Service Offerings for Corporates

Contents

A Overview of FSRM practice

B A snapshot of our solutions

1 Price Risk Management for Commodities

2 Currency Risk Management
3 Hedge Accounting and Quantitative Advisory
4 Treasury Advisory
5 Financial Supply Chain
6 Treasury Audits and Process Reviews
7 Integrated treasury setup and handholding

C Select Credentials

Page 2 Our Risk Advisory Service Offerings for Corporates

An overview of the FSRM practice
Financial Risk Advisory Services practice profile

• Dedicated Team of more than 20 Financial Risk Services specialists

• Subject matter experts across processes, strategies, systems, valuation and market dynamics
People • Specialized crack-teams covering Quantitative Advisory, Hedge Accounting, Treasury Advisory, Treasury
Audits, Currency Risk and Commodity Risk

• Experience of working with more than 100 Corporates, Banks and Financial Institutions in the area of
Experience financial risk management
• Extensive experience with Companies across industry verticals

• Bunge Group • Air India • Vedanta Group • Shell

• Louis Drefus • Tata Power • Hindalco • Reliance
Key Clients • Ruchi Soya • Crompton Greaves • Hindustan Platinum • Essar
• Wipro • TCS • Sigma Elec. Group • HPCL
• Tata Chemicals • Titan Industries • Tata Motors • GSPC

• Investment in market information systems and risk quantification techniques

• Development of decision support MIS to facilitate
Innovation • Development of performance reporting MIS to facilitate ongoing decision making and senior management
oversight

• Sound and proven methodology applied across industries, asset classes

Methodology • Structured approach addressing setting up end-to-end capabilities building for clients
• Methodology evolved through experience incorporating leading industry practices
4
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 High-level overview of service offerings

EY service offerings cover all aspects from strategy to operations

Components What we deliver Why is it important

• Critical evaluation of existing strategies • Protecting bottom-line within risk appetite

Strategy • Report on alternate strategies • Dynamic hedging strategy to adapt to
• Risk-return and impact analysis unprecedented market movements

• Evaluation of accounting impact

Hedge accounting • Compliance with FAS-133 / IAS-39 / AS-30
• Hedge accounting policy, MIS & processes
framework • Managing accounting impact of hedge cash flows
• MIS framework for hedge effectiveness testing

• Governance and comfort to stakeholders

• Currency risk management policy
• Capability building
People and processes • Decision support tools and MIS
• Simplifying and mechanizing the decision making
• Training and handholding
process
• Single measure for realistic performance
Performance • Reporting framework – transaction and performance
• Performance and risk indicators assessment
management • Transparent reporting to stakeholders

• Report on benchmarking with global leading • Keeping sight of market practices and learning
Benchmarking and
practices from experience
oversight • Ongoing review and independent oversight • Management of operational risk

Page 5 Our Risk Advisory Service Offerings for Corporates

A snapshot of our solutions
 1
Price Risk Management for Commodities

Commodity Industry/ Sector covered Primary solution offerings

• Review of physical and paper trading activities

• Commodity trading companies
Agro-commodities • Setting up integrated trading desk (physical and paper) covering
• End-users
commodities and freight

Crude Oil and • Oil exploration & production

• End-to-end integrated advisory covering setting up oil price risk
Petroleum • Refineries
management desk
Products • Oil marketing companies

• Fertilizers & chemicals

Fuel Oil/ Furnace • Glass manufacturing • Setting up of centralized hedging desk for hedging fuel oil price risk
Oil • Electricity generation

Aviation Turbines • Airlines • Setting up of centralized desk to manage procurement and hedging of
Fuel • Oil marketing companies ATF

• Mining companies • Review of existing hedging setup for miners & processors
• Set-up of hedging desk for miners and processors primarily to enable
Metals • Processors
forward pricing for customers
• End-consumers • Set-up of hedging desks for consumers

• Set-up and review of bullion consignment, gold coins and gold on loan
Bullion • Banks and financial institutions product offerings
• Set-up and review of bullion investment desks

Page 7 Our Risk Advisory Service Offerings for Corporates

 2
Currency Risk Management
Addressing challenges and stakeholder expectations for robust company wide currency risk management

Benchmarking and
Study the underlying exposures in detail • Oversight committee to govern the currency risk
• Quantify the risk in monetary terms
management function

oversight
•
Strategy

Set the acceptable risk appetite • Ongoing management assurance through reviews of
• Determine the minimum hedge ratio
• strategy and processes
Define market-driven benchmarks to enable adjustment • Strengthening operational practices by benchmarking
of hedge ratio band in line with market volatility and
against global leading practices
budgets

• Monitor net open positions closely to assess accounting • Establish a single simplistic measure to evaluate

management
Performance
Accounting

impact performance keeping in mind both hedge and underlying

• Adopt hedge accounting to facilitate aggregation of exposures
hedge and exposure cash flows • Assess impact vis-à-vis pricing, budgets and accounting
• Strengthen rationale and hedge documentation to profit and loss
establish cash flow offset • Reporting on key parameters to senior management

• Standardize processes and decision support tools that minimize human judgement
• Empower people through knowledge sharing and capability building
• Establish strong controls to mitigate operational risk in hedging operations

People and processes

Page 8 Our Risk Advisory Service Offerings for Corporates

 3
Hedge accounting and Quantitative Advisory

Accounting and Valuation solutions to support your risk management framework

 Implementation of FAS-133 and FAS-52 to the extent they affect currency risk management operations
 Strengthening processes related to hedge accounting to ensure that profit and loss impact is not impacted as a result of weak
hedge rationale or documentation
Objectives

 Accurate reflection of hedge and exposure cash flows

 Valuing of portfolio, financial instruments and Value at Risk

 Assessment of accounting impact of hedging strategies

 Put in place mechanism to monitor net open positions that can potentially impact accounting P/L
Key activities

 Assess techniques to manage accounting impact of hedging operations

 Strengthening the process for hedge-exposure allocation and establishment of hedge rationale
 Put in place a process for hedge effectiveness testing
 Develop MIS to support transaction recording, hedge effectiveness testing and audit trail

 Report on roadmap towards FAS-133 implementation

 MIS framework and documentation standards to support hedge accounting
Outputs

 Frameworks for hedge effectiveness testing

 Quantification of risks and portfolio

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 4
Treasury Advisory
Aligning treasury activities to become business enablers:

We put in place measures to optimize balance sheets and cash flows spanning Loans, Working Capital, Investments and
Exposures

Business value chain

1 2 3 4 5 6
Determination of Manufacturing in
Utilize business
line with budgets Export of Holding of Management of
production costs surpluses for
at production inventory to inventory at receivables across
and structured expansion into
centers marketing centers marketing centers the organization new geographies
margins

1 2 3 4 5 6
Protect a currency Provide low cost Funding inventory Funding debtor
Preserve the
rate that preserves working capital Protect book P/L days across days across
economic value of
the feasibility of a through surpluses from currency geographies and geographies and
strategic
production working capital fluctuations in multiple in multiple
investments
location lines currencies currencies

Transforming treasury into a key enabler in the business value chain

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 5
Financial Supply Chain

Restructuring, Re-engineering , and optimization of the Financial Supply Chain

Challenges Solutions
Borrowing and
Risk • Optimize and streamline capital structure
Capital Raising
management
Costs

• Restructure processes to utilize working capital

Working Capital more efficiently

Boost Sourcing • Mutli-geography sourcing / invoicing centers

Capabilities

Manage Currency • Reduce the incidence of market risks

and Commodity • Reduce the cost of hedging through increased
Risk market access

Compliance and • Enable better management controls and

Controls reduced costs of regulatory compliance

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 6
Treasury Audits and Process Reviews
Process Re-engineering to optimize treasury workings

1 2 3 4 5

Benchmarking of Evaluate decision

Current state Roadmap for
Assess coverage of operational aspects support, risk
assessment and
measurement and enhancing treasury
indexing (scoring) treasury strategy covering
performance function and
against leading and policy and processes,
management scoring index to
practice repository potential impact on systems,
framework for evaluate
at an industry level financial infrastructure, ongoing enhancement and
and across statements staffing and monitoring of maturity on an
corporate reporting treasury function
treasuries ongoing basis

Current state Report on Report on Implementation

Performance
assessment index improvements in strengthening roadmap and
and gaps against management
treasury strategy and operational treasury
leading practices framework improvement index
policy processes

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 7
Integrated treasury setup and handholding

Translating top management concerns on risk into a powerful risk framework to manage financial risk

Stakeholder expectations
Contemplate

Vision
Tolerance level of the Company
Risk Capacity
Assess

Quantum of risk resulting for

Inherent risk profile underlying business
Manage

Transfer risks to a central entity to

Integrated trading and risk management manage
Limit

Risk Limits Limit risk within the tolerance level

Monitor

Align individual goals with risk

Performance and risk indicators
appetite and limits set

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 7
Integrated treasury setup and handholding

We handhold clients right from understanding their risk to putting in place measures to manage it

1
Exposure collation and 2 Risk quantification and
aggregation assessment of potential
impact 3
Decision support &
setting hedge ratios

We put in place strategy to cover the entire exposure 4

Setting of target/
management cycle with focus on risk analysis and decision benchmark rates
support

5
Re-balancing portfolio
6
Transaction recording
8 Single measure and 7
P/L and MTM
KPIS for performance
mgmt computation

Page 14 Our Risk Advisory Service Offerings for Corporates

Select Credentials
Our credentials

Clients spanning industries and sectors

Telecom and technology Energy Pharmaceuticals

 HPCL
 Tata Communications Limited  Ranbaxy Laboratories Limited
 Mangalore Refinery and Petrochemicals
 Vodafone Essar Limited Limited  Torrent Pharmaceuticals Limited
 IDEA Cellular Limited  Haldia Petrochemicals Limited
 Dr Reddy’s Laboratories Limited
 Lenovo India Private Limited  Mahanagar Gas Limited
 Suzlon Energy Limited  GVK Biosciences
 Bharti Airtel Limited
 Reliance Industries Limited  Jubilant Organosys
 Etisalat DB Telecom  ONGC
 Tata Teleservices  Essar Energy Plc  Matrix Laboratories Limited

IT/ITES Agro and related commodities Industrial Products

 Semco Electric Private Limited

 Tata Consultancy Services Limited  Ruchi Soya Industries Limited
 Enkei Castalloy Limited
 A leading software company with exposures  Bunge Limited
exceeding USD 4 billion  Hindalco Industries
 Gujarat State Fertilizers and Chemicals
 Wipro Limited  Crompton Greaves Limited
 Zensar Technologies Limited Limited
 FAG Bearings
 Keane Inc  ICI Limited
 Sajjan Industries Limited
 A leading BPO company with exposures  SRF Limited
exceeding USD 1 billion  Vedanta Resources Plc
 Rallis India Limited
 Ispat Industries Limited

Page 16 Our Risk Advisory Service Offerings for Corporates

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This document contains confidential materials proprietary to Ernst & Young LLP (‘EY’). The materials, ideas and concepts contained herein are to be used solely and
exclusively to evaluate the capabilities of EY to provide assistance to the Company. This document is intended solely for the information and use of the Company’s
management and is not intended to be and should not be used by anyone other than these specified parties. EY therefore assumes no responsibility to any user of the
document other than the Company. Any other persons who choose to rely on this document do so entirely at their own risk.

This proposal does not constitute an agreement between EY and the Company. Any services EY may provide to the Company will be governed by the terms of a separate
written agreement signed by both the Company and EY. This document is based on information provided to us by the Company, which we have not verified. Accordingly,
we are not responsible for any inaccuracies in that information. Furthermore, changes in the Company’s definition of requirements will necessarily affect the proposal set
forth herein.