AXISCADES Technologies Ltd Management Discussions.


ER&D sector covers products, services, and solutions catering to the design and engineering needs of manufacturing industries across the entire value chain. Major drivers that have led to the growth in the globalization of ER&D sourcing include global markets and local products, cost arbitrage, a larger pool of resources, a need for lesser time to market requiring 24/7 productivity, innovation, government regulations, etc.

The National Association of Software and Services Companies (NASSCOM) expects the engineering and R&D (ER&D) sector in India to grow to US$ 42 billion by FY2022 and is projected to touch US$ 2 trillion globally by 2022. Six major trends that are currently driving digital ER&D across multiple sectors globally are Internet of Things, Big Data Analytics, Artificial Intelligence and Machine Learning, Cybersecurity, Advanced Robotics, Mobile Applications and Digital Reality.

The Indian ER&D industry is taking huge strides over the past and is now focused on digital services to sustain its leadership position. This is leading to Indian Service Providers and Global In-house Centre (GIC) stepping up the value ladder in capturing global opportunities. Outsourcers have a positive outlook for offshoring ER&D services work to India across different verticals and the key growth drivers for the industry are going to be Indias capabilities in the Automotive, Aerospace, Construction and Heavy Engineering (C&HE) markets, which is being accentuated by local talent and rising domestic demand. Due to the availability of high-skilled talent, many international companies have announced GICs in India, which currently account for 55% of the overall ER&D export revenues. GICs are also said to be maturing into capability centers, and are investing heavily on talent and innovation, building dedicated centers focused on digital technologies. This is enabling digital services to now outpace growth in conventional revenue segments, with Industry 4.0, electric vehicles, autonomous, connected vehicles, smart products and automation leading the way, and the digital spend in the sector is set to increase to 30% by 2025.

Industry leaders are redesigning their customer offerings, capabilities and operating model to take full advantage of digital technologies to keep step with the "connected" consumer and attract talent. Others are creating qualitatively new business models and tremendous value around disruptive digital opportunities. This major change can be encapsulated as an intersection of the traditional ER&D services with digital technologies to re-engineer the entire product lifecycle processes to deliver, not just a standalone product, service or solution, but an experience to the consumer.

Leveraging Industry 4.0 technologies along with advanced sensors, automation and data analytics to adopt paradigms of Smart Product and Connected Factory is another major driver of changing trends within the industry. Other key themes such as Sustainability, Digitization, Localization, Platform Consolidation, and Cost Efficiencies also continue to remain relevant for the customers. Hence, service providers with deep and differentiated Digital Engineering capabilities aligned with the digital products that customers want to invest in are expected to find greater favor. These trends have resulted in key ER&D players within the industry to invest heavily in developing digital capabilities or acquire those capabilities either through acquisitions or joint ventures or technical alliances. Also, an increasing number of digital transformation deals are coming in the way of ER&D players because they have a far deeper understanding of customers products and value chain.


ER&D Services: Global

As per Zinnov Zones 2018 report, the Global Corporate ER&D spends in 2018 were more than US$ 1.228 trillion with the Corporate R&D spends by companies worldwide topping at US$ 975 billion. This translated into a growth of 11.9% over 2017 total ER&D spends US$ 1.097 trillion and 13.9% for the global R&D spends US$ 856 billion in 2017. Zinnov also expects the total ER&D spends to touch US$ 1.722 trillion mark by 2023, translating into a CAGR of 7%.

With digital products disrupting nearly all industries, and purely digital companies capturing most of the value growth ahead of traditional behemoths, ER&D spends are increasingly shifting from traditional areas towards Digital Engineering themes. The Zinnov Zone 2018 report expects Digital Engineering spends to have a share of 37% in the total ER&D spends by 2023. This is a massive jump from 15% contribution in 2013 and 24% in 2018 (US$ 293 billion). Digital Engineering spends by companies can be broadly categorized into two areas:

1. Digital Infrastructure to either digitize the Product Lifecycle process or invest in new digital technologies such as AR/VR and AI

2. Digital Products or Services that are smart, connected and responsive such as connected cars, wearables, predictive asset maintenance, etc.

The underlying objective of the companies in doing so is to improve product development speed and customer experience, generate alternate revenues and make processes more efficient for higher quality. Digital Engineering spends continue to remain skewed towards the North American region which has a 58% share, followed by APAC at 22% and Western Europe at 20%. Chinese companies account for more than one-third of APACs share.

The Global ER&D services outsourcing industry is pegged to grow at 14-16% to reach a size of US$ 145-155 billion by 2020 from the 2017 levels of more than US$ 100 billion. Another estimate by Wiseguy Consultants anticipates the market size to cross US$ 650 billion by 2025. Increasing ER&D spends and access to quality talent would mean that India and China will continue to be the leading low-cost destinations for outsourcing of ER&D services. Increasing spends on Digital Engineering by the customers are likely to translate into an increasing share of Digital Engineering deals for the Service Providers. Digital Engineering deals are projected to reach a share of 25-30% by 2022 from 10-15% in 2017. Major deals are likely to be in the area of development of Customer Experience Platform using digital technologies, Digital Products, loT System Integration, API Economy, Modernization & Digitization of Legacy Systems, etc. with the clients focus on renewing the old and building the new.

ER&D Services: India

ER&D services outsourcing segment is one of the major segments within the overall global services sourcing from India. This segment has a diverse set of players such as captive R&D centers of global corporations, specialized full spectrum ER&D players, niche players and large IT-ITES behemoths that cater to the global demand for ER&D services from India. NASSCOMs 2019 Strategic Review report estimated that ER&D continued to remain as the fastest-growing segment at 13% YOY growth over FY2018 and contributed 16% of the overall US$ 181 billion revenue of the Indian IT-ITES industry in FY2019. While ER&D exports from India are expected to touch US$ 30-38 billion by 2020, ER&D services demand within India is also likely to soar on the back of Make in India initiative of the Government of India attracting global OEMs to move manufacturing here, Indias own economic growth coupled with global ambitions of Indian companies and a sustained thrust for indigenization efforts, especially in industries such as Defence, Automotive and Heavy Engineering. Indian Governments policy initiatives such as offset program for defence imports, increasing percentage of Make in India mandate for defence procurements, advanced launch of BS-VI norms by 2020, FAME policies for promoting Electric Vehicles with target share of 30% by 2030, etc. are also giving a thrust to demand for ER&D services in the country. The escalating trade war between the United States and China is also likely to push more companies to diversify their manufacturing presence and thus benefit India. Considering these factors Indian ER&D segment is expected to grow 3X to reach anywhere between US$ 70-90 billion by 2025, a CAGR of 15%.


Traditional R&D spend of Z1000 organizations rose to US$ 812 billion in 2018 with the following distribution among verticals:

Z1000* R&D Spends (2018) in US$ billion

*Z1000 are the top global corporations in terms of R&D Spends as identified by Zinnov

Considering the verticals that AXISCADES is active in, the total addressable Global ER&D market is over US$ 300 billion. The ER&D spend outsourced to India is expected to reach US$ 42 billion by 2022. AXISCADES is strongly placed to address both the global and Indian industry needs and capture a large share of this ER&D pie.

Key industry trends that are likely to affect the global ER&D spends in these verticals are as follows:

• Global Aerospace & Defence Industry was forecasted to reach US$ 2.5 trillion by 2024 as per an article in EMSNow, an online news portal for the Electronics Manufacturing Services industry

• Growing commercial aircraft production to cater to the massive growth in passengers and strong defence spending due to continued geopolitical tensions are likely to sustain the growth of Aerospace and Defence companies in 2019 as per the Global Aerospace and Defence Industry Outlook report published by Deloitte

• A backlog of commercial aircraft orders at a peak of 14,000+ and a total of 38,000 commercial aircraft to be produced globally to meet the growing passenger and old aircraft replacement demand according to Deloitte

• While the United States continues to be the leading spender on defence, the major growth is coming from countries like China, India, Saudi Arabia and now Europe, where the NATCO countries are targeting to achieve a spend of 2% of GDP on defence

• India is one amongst the largest arms importers, which now contributes 12% of the total arms deals. The offset opportunity is likely to grow considering the upcoming modernization of defence forces and increasing pace of offset obligations maturing

• The global auto industry is yet to recover from a slump in demand seen in the latter half of 2018, with projected growth of only 0.5% in 2019. 2020 is also likely to see only a modest recovery to 0.8% as per Moodys. However, the auto industry continues to be the largest ER&D spender

• Globally Wind and Solar contributed more than 50% of new power generation capacity additions in the recent past Renewables are expected to be more than 50% of the total installed power generation capacity by 2035. Solar and wind generation are expected to surge by 60 and 13 times respectively, from 2015 to 2050. (McKinsey & Company)

• Global nuclear energy demand is estimated to grow at a CAGR of over 4% in the period 2015 to 2022 from a level of 2,400 TWh in 2014

• Global medical devices market size was expected to touch US$ 409.5 billion by 2023, according to a market report published by Lucintel, at a CAGR of 4.5% from 2018 to 2023

• The global semiconductor market saw its size grow by 13.7% to US$ 468.8 billion in sales with a shipment of 1 trillion units to customers (Source: Semiconductor Industry Association). While Gartner has forecasted a higher CAGR of 5.1% from 2017 to 2022 as compared to 2.6% from 2011 to 2016, the growth is likely to dip to 2.6% in 2019 from the highs of 2018


Company Overview

AXISCADES Engineering Technologies Limited is a leading engineering solutions provider to companies in diverse industries such as Aerospace, Defence & Homeland Security, Automotive, Heavy Engineering, Industrial Products, Energy, Semiconductor and Medical & Healthcare. AXISCADES is a preferred engineering partner for many global leaders in these verticals with complex supply chains, mission-critical applications, and highly advanced technologies. It supports customers across their entire value chain from concept design to manufacturing to aftermarket solutions throughout the Product Lifecycle. Its comprehensive engineering capabilities and a suite of offerings cover:

• Mechanical & Electrical Engineering Solutions: Product Design & Development, 3D CAD Modeling, Value Engineering, Simulation & Analysis (CAE), etc

• Electronics and Embedded Systems: Avionics, Control Systems, Telematics, Autonomous Mobility, Test Solutions, System Integration, Simulators etc

• Manufacturing Solutions: Production Support, Manufacturing Execution Systems, Shop Floor Automation, IIoT, etc

• Digital Solutions: AI, Machine Learning, Product Lifecycle Management, AR/VR, etc

• Business Consulting: Product Throughput & Productivity, Business Process Design, etc

• Aftermarket Solutions: Technical Publications, Platform Migration, Reverse Engineering, etc

AXISCADES is a preferred strategic partner for global OEMs and suppliers for delivering end-to-end Engineering Solutions and Products across the globe, amply illustrated by 8 ODCs operations managed by the Company. Its pool of 2,300+ highly-skilled engineers delivers value from their base in one of the 16 Global Engineering Centres (GECs) in North America, Europe, and APAC, which includes India and China. Out of these 16, proximity GECs are based in

Toulouse, Hamburg, Augsburg, Donauworth, Peoria, and Denmark. It also includes a sizable pool of relationship managers, consultants, and engineers based out of its sales offices and client locations. The average experience of its engineers is more than 7 years with the best mix of engineering, domain, and digital capabilities.

AXISCADES is trusted by its clients to work in perfect collaboration to always achieve their technical and business objectives by staying committed to quality processes and industry best practices. In addition to a series of acquisitions to acquire the full spectrum of capabilities in the ER&D space, the Company has also entered into various alliances and joint ventures to develop a partner ecosystem. This includes its Joint Venture Assystem AXISCADES Engineering Pvt Ltd with the French multinational Assystems Engineering Operation Services (AEOS) to cater to the Energy (both Conventional and Nuclear Energy) and Infrastructure sectors engineering needs in India and across the world. It has also entered into partnerships with VRM Technologies to cater to Aerospace & Defence requirements, and other suppliers for expertise in specific applications and/or technologies. AXISCADES has a total of 18 partners to enable it to be a one-stop-shop solution provider by developing an ecosystem that can be leveraged to address internal competency gaps. AXISCADES license for Defence manufacturing and being a preferred India Offset Partner further enables it to collaborate with global OEMs for Manufacturing or Sourcing from India either in Defence or other verticals. MISTRAL, its subsidiary, has won 20+ awards for its designs of electronic products and systems, and more than 100 of its designs have been commercially exploited. MISTRAL has on-boarded more than 350 skilled embedded engineers and it has alliances with 24 technology partners to deliver Embedded Systems & Products from concept to deployment for Aerospace & Defence, Homeland Security, and various other products for varied uses.

The Company is headquartered in Bengaluru and is publicaly listed on the Bombay Stock Exchange (532395) and National Stock Exchange (AXISCADES).


Strategy & Business Model

AXISCADES has aligned its business strategy to seamlessly align with the transformation and disruption being faced by companies that operate in the verticals that it caters to. In line with this approach, it has embarked on a journey of change from being a Services Organization to being a Solutions Organization that is the partner of choice and leading ER&D partner for all marquee OEMs, Tier 1 and Tier 2 suppliers in its target verticals. To this end, it has identified four major elements of this change within which the Company will roll out specific tactical amendments and strategic initiatives.


• High stress on acquiring end-to-end engineering services capabilities including Mechanical, Electrical, Electronics, and Embedded

• Use both organic and inorganic approach to achieve this objective.

• Focus on identified "Must Grow" and "Must Win" accounts and growing the top two relationships


• Integrate digital technologies such as AI/Machine Learning with core Engineering Services to address the Digital Engineering paradigm that is the most strategic need of the customers. Similarly, leverage digital competencies to strengthen its Industrial Internet of Things (IIoT) / Industry 4.0 offerings

• Balance the revenue portfolio with higher growth in Embedded and PLM offerings vis-a-vis core Product Engineering solutions

• Implement automation of the delivery process and utilize Machine Learning solutions for internal use to improve our efficiency


• Specialize and concentrate on Aerospace, Defence, Heavy Engineering, Energy, Automotive, Medical Devices and Semiconductor verticals

• Develop "Engineering Stack" for offering targeted Digital Engineering solutions for each of the above verticals

• Deepen expertise by forming practices and develop products in new technology areas for industry-specific solutions

Talent Pool & Reach

• Greater focus on expanding presence in North America and Europe vs. growth in APAC, specifically India

• Enter into more alliances with specialist companies in digital technologies such as AI, Machine Learning, Additive Manufacturing, PLM, IoT etc

• Form R&D partnerships with academic institutions in India and across the world AXISCADES business model creates value through deep competencies and global delivery management. Its competencies help the Company offer distinct and high impact solutions leading to greater trust and higher wallet share from each client. Its Global Engineering Centres help offer a balanced value proposition of lower costs, lower program risks, faster time to market, and sustainable innovation to its customers.

Some of the major verticals addressed by AXISCADES did not see much growth in ER&D spends and there was a decline in volumes in the second half of 2018. This impacted the business momentum in FY2019 for the Company, however, the market is now poised for growth with an increasing focus to outsource/ right shore ER&D needs because companies increasingly find it difficult to develop diverse capabilities that would be required to insource intricate solutions at the intersection of digital and engineering technologies. In addition to this Make In India is likely to give thrust to its demand for its products and offerings in Defence and Homeland Security vertical. AXISCADES has in place a capable and experienced management team that is focused on the execution of the right strategy that has been chosen and delivers value accretion for stakeholders.

Key Strengths

• AXISCADES has grown its large accounts portfolio from just a single customer in FY2008 to 14 in FY2018 and has added 7 new logos in FY2019. These are top-tier companies and global leaders in their respective verticals. These accounts contributed 80% plus revenue in FY2019. Two accounts are contributing more than US$ 20 million and five contributing between US$ 5-20 million

• AXISCADES has proven itself as a reliable, long-term partner as seen in its repeated business rate of 90% in FY2019. It has retained of large accounts that are more than five years old

• AXISCADES has expertise in ER&D space across six different domains and can offer end-to-end offerings to qualify as a strategic partner

• Scaled and skilled talent pool available across the globe (onshore, nearshore and offshore) aided by a reliable partner ecosystem of alliances

• The Company is strongly committed to quality and has implemented a comprehensive Quality and Compliance Management Framework that includes a Quality Management System developed to accommodate not only the customer and certification requirements but statutory, regulatory, and business requirements as well. Various certifications acquired by AXISCADES and its subsidiaries are IS09001:2015, IS027001:2013, AS9100D, ISO13485, CMMI, DO-178B, and CEMILAC certifications. Besides, it has also accomplished compliance with global industry standards and has secured authorizations/licenses, such as AUTOSAR, AP1020, and India Offset Partner

Key Business Highlights Heavy Engineering

• Heavy Engineering was the top vertical segment for AXISCADES with a contribution of 41.3% to the group revenue in FY2019

• Longstanding position as the leading Engineering Services Provider to a North American off-highway OEM

• Added 4 large off-highway/heavy engineering customers in FY2019


• Aerospace is the second-largest vertical segment for AXISCADES with a contribution of 31.5% to the group revenue in FY2019

• Strategic partner to top 3 of 10 OEMs of Commercial, Business, Military and Special Purpose aircraft

• Maintained its position as an A category supplier with one of the worlds leading aircraft manufacturers by completing a Technical Development Capability Assessment audit

• Achieved considerable growth in volumes for the account for supporting extended requirements

Defence & Homeland Security

• Defence, on the other hand, contributed 21.3% of the total revenue in FY2019

• Aligning with the global OEMs to deliver to the domestic market given the increasing defence procurement by India, and increasing participation in the global supply chain business of these OEMs in parallel

• The extended time-frame for contract closures in domestic defence programs, adversely impacted business from the Defence sector


• Automotive is one of the growth verticals for the Company because of its ER&D spends and growth potential. At present, it contributes a small share of 3.4% in the total FY2019 revenue

• Acquired several OEMs as customers in Europe and India in this vertical which have the potential to be strategic customers in future


• In addition to the Wind Energy sector that it is used to cater to, AXISCADES now also tenders services to the Conventional and Nuclear Energy sectors through its Assystem JV. FY2019 revenue from this sector was 2.3% of the total

• Operates a dedicated Offshore Development Centre for a European OEM

• Signed a multi-year contract with a German wind energy company

Medical & Healthcare

• With its expertise in operating in a highly regulated sector such as Aerospace and Defence, and added Embedded capabilities of MISTRAL, AXISCADES is better placed to expand its presence in this vertical. In FY2019 share of this vertical went up from 0.17% in FY2018 to 0.20%

• Two new customers were signed-up from this vertical in FY2019

Other Highlights

• Overall new client additions across a different group of companies were 74 with MISTRAL adding 44 new clients and AXISCADES adding 29 new logos on a standalone basis

• The closing order book for Engineering Services was US$ 63 million and for Product & Solutions was US$ 33 million

• AXISCADES joined Siemens MindSphere partner ecosystem for IIoT services catering to Aerospace, Automotive, and Industrial verticals

• The Company has undertaken cost rationalization measures to reduce costs by Rs 100 million on an annualized basis from FY2020

• Opened a new facility in Pune to support expansion

• AXISCADES introduced a Finishing School Concept where it works with Engineering Colleges to build additional depth of Engineering concepts in students in line with the Companys requirements

Inorganic Expansion

• After completing Phase 1 of MISTRAL acquisition in FY2018 with the acquisition of 43.38% stake and board control of Mistral Solutions for a consideration of Rs 701.3 million, AXISCADES acquired an additional 44.62% stake as part of Phase 2 of the acquisition in FY2019. As per the accounting standards, since the Company has management control of MISTRAL, its financials are consolidated with AXISCADES financials effective from 1 December, 2017


FY2019 is the first full financial year for consolidation of Mistral Solutions financial as against 4 months in FY2018. Consolidated operating revenue for the full year in US$ terms was US$ 87.1 million, as against US$ 79.9 million in FY2018. Overall operating revenue (in ) growth in FY2019 was 17% on a YOY basis over FY2018. On an organic basis, the movement in revenue was a YOY growth of 0.1% in the reported period. Aerospace, Heavy Engineering, Automotive, Product and Solutions verticals contributed to revenue buoyancy whereas Energy verticals either shrunk or were flattish. Engineering Services segments performance in FY2019 was a growth of 15.6% as against Strategic Technology Solutions segment which grew by 22.8%.

The operating margin for the group in FY2019 declined to 3.4% vis-a-vis 6.1% in FY2018. Breaking down this decline between segments, Strategic Technology Solution business operating margins declined from 18.8% in FY2018 to 3.0% in FY2019 and Engineering Services margins grew to 3.6% from 2.1% in the previous year. Major reasons for the declining margins were provisions for bad debts ( 100 million from a US-based HiTech start-up) other one-time provisions and FOREX losses. In addition to the operating level impact on profit, there was also a non-cash impact related to MISTRAL acquisition amounting to Rs 135 million and an exceptional income of Rs 145 million arising from the re-estimation of the fair value of a contingent liability. Profit after tax in FY2019 was Rs (77) million as against Rs (78) million in FY2018.


Managing and mitigating risks to the sustainable achievement of goals and longevity of the business is a key responsibility of the management team at AXISCADES. Based on the nature of its business, the Company is exposed to a specific set of risks, which have been identified and a risk management plan has been developed. After the assessment and estimation of these risks, they have been separated into transactional, strategic and external categories to develop an appropriate management and mitigation approach. Typically, transactional risks are managed through well-defined processes and internal controls. On the other hand, strategic and external risks need to be mitigated with approaches that involve enhancements to and through business strategy, operations and financial management, and human resource initiatives. Principal among these risks and the approach taken to manage and mitigate these risks are given below

Economic Environment & Demand Risks

Sluggish economic environment may impact demand for the Companys services from affected regional or vertical markets. Such situations may also impact business from one or more of large customers of the Company as well. The resulting decline in volumes can impact the financial results of the Company.

Risk Mitigation

Major mitigation approach is to diversify customer and market portfolio of the Company to spread demand risk by reducing overdependence on a small set of customers or a region/ industry. This can minimize the severity of impact in the event of adverse economic environment affecting business from a small subset of customers. The Company has an active strategy of expanding its presence in more countries and add new products targeting newer verticals, while simultaneously acquiring new customers in existing markets. In addition to this, the periodic study of industry trends and market research helps the Company understand shifts in customers stated and unstated needs.

Operating Environment & Technological Evolution Risk

The fast pace of change in the industry, disruptive technologies, evolving customer needs in changing the operating environment, etc. may lead to a mismatch in terms of the solutions needed by the customers and those offered by AXISCADES, which causes slippage in performance. An increase in competitive pressure in the market is also likely to affect the Companys performance.

Risk Mitigation

Such risks can be mitigated through investments in:

1. Dedicated client relationship teams that can develop a significantly better understanding of clients needs and operating environment. This will not only help to align the Companys services to emerging needs but also keep competition at bay.

2. Market research to keep abreast of emerging client needs and new technologies that can affect clients, and Companys, operating environment by reducing costs or increasing productivity or fundamentally disrupting business models.

3. Partnerships with technology partners, internal R&D, institutionalized knowledge building and skill development to develop capabilities in line with technological changes and strengthen the value proposition to keep ahead of the competition.

4. Productivity improvement initiatives to target continuous improvement in operational efficiencies to either reduce costs or offer higher value to clients.

Currency Valuation Risk

A major proportion of the Companys business originates in international markets, and hence it is paid in currencies other than Indian Rupees. Fluctuations in the valuation of these currencies from the time of bidding to project budgeting to delivery to realization creates a significant risk.

Risk Mitigation

Apart from the natural hedges through costs and liabilities in the currencies which AXISCADES has exposure to, the FOREX valuation risk can be managed and mitigated through:

1. Diversification in regional markets by increasing the exposure to a wider basket of currencies.

2. Develop a risk management policy that involves proactive hedging of incremental exposures through available financial instruments.

Human Resource Risks

Human talent is the base on which the Company delivers solutions to its clients. Risks to the deployment of right competencies in the right quantities or productivity of its manpower may arise from the inability to attract and retain personnel, cultural mismatch in recruitment and M&A integrations, changes in rules governing international mobility of personnel and other factors.

Risk Mitigation

The Company is continually focused on building and nurturing capabilities by implementing best practices to attract, motivate and retain the best of human talent with the organization, including maintaining an optimal resource bench. Ensuring twoway communication flow and employee engagement initiatives, especially at the time of inorganic integrations, to align the employees with Companys stated culture and goals. AXISCADES business model takes local manpower hiring to staff most of its client-side requirements into account, and thus deliveries are not affected due to visa restrictions.

Intellectual Property & Data Security Risks

Unauthorized access and/ or exploitation of IP or sensitive data residing within the Company that may belong to either Company or clients or any other third party may expose the Company to a financial and reputation loss through litigation or financial claims or fines or extra costs or loss of business. This may be done either through cyber-attacks or unauthorized physical access or rogue employees.

Risk Mitigation

Formulation and strict enforcement of a comprehensive IT Security Management framework covering systems, processes, manpower and overall infrastructure is the holistic way of managing IP and Data Security risks. Some of the basic principles that are incorporated in this framework design are restricted need-based access, physical security, established protocols for breach management, and regular audits and reviews of security protocols.

Execution Risks

Operational mismanagement or unplanned disruptions may lead to liability claims from clients due to deficient delivery or unplanned incurrence of costs. Systemic disruptions may occur due to the failure of telecommunications, power or IT systems from human error or mechanical failure or natural/ man-made disasters.

Risk Mitigation

Disaster Recovery Site and a Business Continuity Plan to ensure service continuity in spite of disruptions is the first step. This also includes building an optimal system redundancies and ensuring data backups. The Company has also ensured service levels including uptime are committed through agreements by service providers. Further to limit financial damage, the Company has also taken adequate insurance covers to protect against unforeseen mishaps, disasters, and liabilities. Continuous and consistent monitoring of operations is a part of the management philosophy at the Company to ensure quality and completeness of delivery.

Regulatory Risks

AXISCADES caters to clients from some of the most highly regulated industries and these require it to adhere and follow a broad array of laws, compliances, and regulations, in addition to local requirements of countries it has a presence in. Failure to comply with these requirements can lead to claims, liabilities, business closure, loss of reputation and in some cases even imprisonment.

Risk Mitigation

All applicable laws, compliances, and regulations that the Company needs to comply with are identified, responsibility assigned and compliance monitored. These are managed with a thorough Compliance Management System. Assigning appropriately qualified resources to manage such compliances and continual education of operations staff involved is equally necessary. Periodic review and internal audit reports to the board are part of the risk management process.

Additional comments

The Global ER&D services outsourcing industry is pegged to grow at 14-16% to reach a size of US$ 145-155 billion by 2020 from the 2017 levels of more than US$ 100 billion - This information is believed to be from Zinnov Report and is not verified

• NASSCOMs 2019 Strategic Review report estimated that ER&D continued to remain as the fastest growing segment at 13% YOY growth over FY2018 and contributed 16% of the overall US$ 181 billion revenue of the Indian IT-ITES industry in FY2019.