Birlasoft Ltd Management Discussions.

About Birlasoft

Birlasoft combines the power of industry knowledge, enterprise solution and digital technologies to reimagine business processes for customers and their ecosystem. Its consultative and design thinking approach helps customers understand the value and outcome of the services being provided coupled with a transparent operating model. As part of The CK Birla Group, Birlasoft comprising of over 10,000 plus professionals, is committed to continuing its 158-year heritage of building sustainable communities.

CK Birla Group Profile

The CK Birla Group is a diversified US$ 2.4 billion conglomerate that has a history of enduring relationships with renowned global companies.

With over 25,000 employees, 41 manufacturing facilities, 21 service delivery locations and numerous patents and awards, the Groups businesses are present across five continents. The Group operates in three industry clusters: technology and automotive, home and building, and healthcare and education. The CK Birla Group companies are strengthened by shared guiding principles that include a focus on long-term value creation, trust-based relationships and philanthropy. Each business is transforming to build on the collective strength and synergies of the Groups size and span.

Industry structure and developments

Indias information technology and back-office sector is estimated to have grown by 7.7% in Financial Year (FY) 2020 to US$ 191 billion, with exports touching US$ 147 billion as per the National Association of Software and Services Companies (NASSCOM), the apex IT & ITES industry body. This growth is slightly slower as compared to 8.1% growth in the previous year. Of the US$ 191 billion revenue, exports constitute ~77%, and ~23% is from domestic revenue (including hardware). The export revenue of ~US$ 147 billion is estimated to have registered a growth of ~8% in FY20, which is marginally lower than the NASSCOM projection of 8.1% for FY20. The sector added about 2.05 lakh jobs in FY20, as compared to 1.85 lakh jobs added in FY19.

Global economic growth expectations remain subdued amidst increasing social unrest and negative sentiment due to the COVID-19 situation and other geopolitical issues. Despite this, technology spend growth expectation for FY20 remains positive, driven by growth in enterprise digital services, software markets as well as IT services. Hiring remains positive amidst demand for new skills and building local scale at onsite locations. The attrition rates have declined versus the previous year due to focused efforts to retain talent through reskilling and localization of talent. The growth for the sector will continue to come from cost reduction initiatives taken by clients, and digital solutioning with clients from developed markets, coupled with higher tech spending.

Company Overview

The financial year 2019-20 was Birlasoft Limiteds first full year of operations post merger, effective January 1, 2019. The Company reported a revenue of Rs. 3,291 Crore (US$ 464 M), EBITDA of Rs. 392 Crore (US$ 55.3 M) with EBITDA margin of 11.9% and a PAT of Rs. 224 Crore (US$ 31.6 M). The company had 10,268 professionals as of March 31, 2020 including net addition of 207 professionals during the year. The Company has strong Enterprise solutions capabilities coupled with Digital capabilities, making it a formidable competitor in the market.

Birlasoft has unique, industry leading capabilities from the Enterprise Product and Cloud solutions domain such as SAP, Oracle, JD Edwards, Salesforce.com, Service Now etc. The company has the highest level of partnership with SAP, Oracle as well as with Salesforce, a position unmatched by any other similar company. Birlasoft also possess significant Digital capability in Analytics, RPA (Robotic Process Automation), Digital portals, User Experience and Digital advisory services. A large set of solutions and offerings continue to demonstrate the Companys capabilities and presence in Application development, support and maintenance for next generation services in the digital world.

Members will be aware that effective January 1, 2019, Birlasoft (India) Limited and the IT services business of KPIT Technologies Limited merged to form a leading publicly listed Enterprise Digital and IT Services company named Birlasoft Limited.

The shares of the former KPIT Technologies Limited (NSE: KPIT) traded as ex-engineering business since January 24, 2019. The name of the former KPIT Technologies Limited (NSE: KPIT) and its stock ticker, changed to Birlasoft Limited and NSE: BSOFT respectively, after the change in name with the Registrar of Companies effective February 8, 2019. The shares of the former KPIT Technologies Limiteds Engineering Services business got listed on the stock exchanges and began to trade on April 22, 2019 with the Company name and ticker as KPIT Technologies Limited and NSE: KPITTECH respectively.

One Birlasoft

Birlasoft Limited is distinctively positioned for opportunities in the enterprise digital space. The previous financial year was about stabilizing the integration of two companies across processes, people and systems, strengthening the capabilities and acquisition of talent in senior leadership roles across the delivery and sales functions, and optimizing certain non-strategic businesses and tail accounts. There has already been an acceleration in Birlasofts participation in large deals, evident from the signing of multiple transformational projects including a multi services deal worth US$ 242 M TCV, with US based healthcare major Invacare Inc. The Invacare deal is the largest deal in Birlasofts history, and the Company expects to gain traction in the market, leveraging scale, play and execution capabilities on the back of this deal.

Some of the other notable highlights during the past year are;

• Stabilisation and integration of two entities across processes, people and systems, while laying the foundation for sustainable long-term growth

• The Company has strengthened its sales capabilities, transitioned to a business and customer centric approach towards winning in the new market dynamics

• Expanding the relationships with existing and strategic customers by cross selling a diverse and enhanced set of services, and becoming more valuable to the customer

• During the year Birlasoft continued to experience balanced growth in opportunities and revenues from digital and Enterprise solutions (e.g. ERP) offerings.

• Focused approach to capability development through leadership development programs, and digital learning and certification initiatives.

• Initiated a cost optimization program at the beginning of the year, especially focused on Delivery and Enabling Functions costs, which saw good progress.

Human Capital

The competitive edge between companies often comes down to its people and processes. The company continues to invest in its human capital, as a strategic imperative, across talent acquisition, skill building, talent management and career development. The past year was one of integration, and the company has committed time and effort in the process and policies harmonisation bringing in best in class practices. Enhancing employee experience has been the fulcrum around which the people dimension of the IT integration has been driven.

People are a key resource, and the company continues to build processes that on one hand help employees align their professional and personal goals, and on the other helps the company align people to opportunities. The Company is committed to leveraging learning and development as a means of upskilling and cross skilling its employees: helping people augment their own skill sets and accelerate their personal growth and organisational capabilities.

Birlasoft has put in place several marquee programs which reinforce its people philosophy:

• a self-help group "Thrive Tribe" for women in mid and senior roles, that offers career mentoring programs to younger women professionals as part of the D&I charter.

• the "Young Guns" program aimed at accelerating the career journey of the younger workforce where the Company collaborates with a leading business school and sets up an experiential learning journey for a qualified group across the company. There are focused in-depth talent reviews for people in leadership roles aimed at helping these people chart and further their personal development plans as part of building a strong leadership pipeline.

• "Star awards" for rewarding critical achievements and reinforcing desired behaviour at the workplace.

Customer Engagement

The Company has over the last year put significant focus on engaging both with existing and new customers. With a clear intent on increasing the annuity segment of revenue and cross selling: a targeted Challenger program was initiated for the top 50 clients focused on developing a deeper engagement model with clients, based on their business imperatives, current engagements and industry led relationships. The Challenger program enables a 360 degree view of the value that the Company provides clients, while enabling a long term strategic partnership with the customer. The verticalization of the market units enable deeper focus on the customer industry and business objectives through value discovery services. This was complemented by a robust customer satisfaction survey both at the relationship and delivery level. A growth based engagement model has been implemented to follow 150 customers, with a focus on cross selling and leveraging core and peripheral services to drive revenue. Birlasoft continues its emphasis on divesting tail accounts. The customer engagement approach has yielded positive results, with an increase in annuity revenue, customer satisfaction, deeper client relationships and cross sell revenue. A number of new well known industry brands have been added to the client portfolio.

Business Outlook

The IT Services market is facing an unprecedented set of challenges as a result of COVID-19. This creates both headwinds and opportunities for growth in the industry. The market reaction to the pandemic has followed the initial expected pattern of rationalization of IT spend. As the market emerges from successive lockdowns, the focus is shifting to prioritize spend, based on cost constraints and business priorities. As a result many transformation programs will get pushed out to the following year.

Industry analysis (Gartner) predict a worldwide IT spend decline of 8% YoY. They cite the COVID-19 pandemic and associated recession as the reason CIOs are reprioritizing spend on "mission critical" technology and services. This includes an urgent focus on cost containment and operations that keep the business running. Gartner does not expect an immediate bounce back, citing recovery to require an improvement both in demand and supply, along with change in consumption behavior.

It lists industries such as entertainment, air transport and heavy industry will be hit hardest, and expects that it will take over three years to come back to the 2019 IT spend levels.

According to the IMF, the global economy is projected to contract sharply by 3% in 2020, much worse than during the 2008–09 global financial crisis. However, it presumes that the pandemic fades in the second half of 2020, and containment efforts can gradually be unwound: as a result the global economy could grow by 5.8% in 2021 as economic activity begins to come back to more normal level. The growth in advanced economies, which accounts for over 80% of Indian IT exports, is expected to decline by a sharp 6%. The US is expected to decline by 6.1%, the Eurozone by 5.9%, and the UK also by a decline of 6.5%. At the moment these are just projections based on our current medical information regarding the spread of the virus, and will most certainly undergo a change as and when more information regarding treatment, vaccines and the success of social distancing norms gets established.

The global spread of the coronavirus has resulted in simultaneous supply and demand shocks, and will materially slow down economic activity across all sectors. The Indian IT services industry is also expected to see an adverse impact over the short term. On the supply side, Indian IT services are facing issues such as travel restrictions as well as closure of offices/work from home at various offshore development centers as well as onshore: severely impacting the movement of people. Analysts expect the sector to clock a negative mid single growth in FY21, with Q1 FY21 being the most impacted quarter. A revenue decline will also see an impact in margins for the IT industry.

Fortunately, governments around the world are acting decisively to protect their businesses and people from the economic disruption caused by the pandemic. Whether through tax cuts, investment incentives or changes to filing deadlines: tax systems will play a significant role in helping alleviate the current financial and economic turmoil. Global lockdowns in response to the coronavirus have resulted in economic turmoil, the worst downturn since the Great Depression in the 1930s. To counter this, almost all major economies have announced economic stimulus packages.

The pandemic is also changing the delivery and consumption model for IT Services leading to opportunities for IT service providers. For a significant number of roles in certain industry segments, WFH is and will become the norm going forward. The focus on cyber security, network connectivity, resilience and related business processes are opportunity areas for IT Services. Cost constraints due to reduced budgets are accelerating the adoption of a consumption model. Movement to the Cloud and As-a-Service model provides further opportunities to help customers become more efficient. Digitization of channels to market are creating omni channel opportunities which bring additional opportunities for both simplification and automation of the underlying business processes and related supply chains.

Business Strategy

Birlasoft has become a strong challenger in the Enterprise and Digital technology segment bringing together strong industry domain capability, coupled with technology partnerships. The focus is on bringing robust industry led solutions to partner with customers to solve their current and future challenges.

Partnerships with SAP, Oracle, JD Edwards and Salesforce, along with a strong referenceable customer base, enables Birlasoft to be an engaged and dependable partner of choice, bringing strong digital capabilities in ERP, Cloud enablement, RPA, Analytics, CRM, Digital and advisory services. The Companys services and solutions are closely aligned with client priorities, making them the pivot around which Birlasoft can deliver value.

Business strategy and focus is aligned with the IT market and customer expectations, both of which follow the approach of rationalization, prioritization and enablement. A focus on rationalization includes protecting and increasing annuity revenue through retaining and winning AMS engagements, increasing the tenure of existing agreements, cross sell and up sell value based services. This enables deeper client engagements and investing by co-solutioning with clients by determining key spend areas, new value driven services and often moving T&M engagements to Managed services. Taking up deferred transformation engagements with an increased focus on key markets with deeper solutions and technology partnerships across key geographies will be a focus on client enablement post COVID-19.

Alongside this, the business priorities include a continued focus on sustainable long term growth, investing in strengthening sales capabilities while transitioning from a technology to a more business centric approach. This will include an increased focus on capability and skill development of the workforce through leadership programs, digital learning initiatives and certification programs.

Risk and Opportunities

Risks

Birlasoft has a very structured and consistent approach in identifying risk, and creating mitigation plans as part of its Governance, Risk, Compliance (GRC) practices.

Please refer to Enterprise Risk Management section

Opportunities

Birlasoft has created a niche in the mid tier IT services companies following the merger with KPIT. Its core values of being an engaged and dependable challenger, combined with the strong client references and capabilities in the ERP segment has positioned us as a strong partner of choice for implementation, upgrades and cloud migration of ERP platforms. The large deal acquisition of Invacare Inc. as a full service customer, demonstrates the ability to win high value deals encompassing a comprehensive client transformation by implementing new age solutions such as SAP S/4HANA, and upgrading the underlying e-commerce platform to help open digital channels for growth. The Companys ultimate success will be determined by the clients success in increased profitable revenue. There are other similar client partnerships that Birlasoft has won against global large scale competitors by showing agility, industry expertise, high quality delivery and a sheer determination to challenge the norm. The focus will be to drive similar selective large scale engagements in the market place, across key industry segments.

Some of the new opportunity highlights post COVID-19:

• WFH, a model of engagement for the continued delivery of Run the Business (RTB) has opened up opportunities for a more sustained way of working. This in turn is forcing organizations to increase their focus on cyber security, infrastructure, operational resilience and business continuity.

• Virtual engagements across business functions is driving the need for collaboration tools for voice, text and video. Application development is rapidly moving towards a location independent agile delivery model, and secure borderless workspace. This has also created additional need for data security, increased storage and productivity tools.

• Digital modernization and acceptance is increasing due to the need to augment revenue which is under pressure through traditional channels. This will entail a rapid adoption of digital enablement through transformation, cloud migration and mobility trends.

• Increased cloud adoption, automation, digitization of processes will drive the growth of Artificial Intelligence and Machine learning paradigms to become the new norm.

• Health and Safety including contactless services will impact organizations to deliver a safe workplace for employees and services for their end clients.

• Commercial models will lean towards a consumption based service delivery for continued cost measures and financial acumen. Customers will seek partners who can provide services in an agile, adoptable and shared risk basis.

Birlasoft, with 50% revenue from Enterprise Solutions and ~38% from Digital is well positioned to leverage the opportunity of digitization of services at a faster pace. The Company identifies itself as a Digital Enterprise Company and aims to deliver superior business value by combining the strength of its domain and technical capabilities.

Financial Performance

The appointed date of restructuring (merger and demerger) being January 1, 2019, the full year financial results for FY 2018-19 for Birlasoft Ltd are for nine months of KPITs IT services business, and three months of the merged entity (Birlasoft (India) Ltd + KPIT IT Services business). So, the 12 months Financial Results for FY 2019-20 for Birlasoft Ltd (the merged entity) are not comparable with the previous years financials FY 2018-19.

The Companys financial highlight for FY 2019-20

The consolidated Profit and Loss account for the year ended March 31, 2020 was as follows:

(Amount in Rs. mn)

Particulars

Year ended March 31, 2020

Year ended March 31, 2019

Revenue from Operations 32,909.69 25,506.67
Employee benefits expense 19,975.41 15,351.93
Other expenses 9,015.09 7,090.78
Total Expenses 28,990.50 22,442.71
Earnings before Interest, tax, depreciation & amortization 3,919.19 3,063.96
Depreciation and amortization expense 825.79 498.74
Earnings before Interest & tax 3,093.40 2,565.22
Other Income (Net) 429.91 260.57
Finance costs 161.27 108.43
Exceptional items - 175.85
Profit Before Tax (PBT) from continuing operations 3,362.04 2,893.21
Tax Expense 1,118.56 539.36
Profit After tax (PAT) 2,243.48 2,353.85

Finance review

Analysis of the Profit and Loss Statement

Revenue: Revenue from operations increased from Rs. 25,506 M in FY 2018-19 to reach Rs. 32,909 M in FY 2019-20. Other income accounted for ~1% share of the Companys revenues reflecting the Companys dependence on its core business operations. The increase in other income was primarily due to forex gains resulting from higher hedging in forward contracts in FY 2019-20, as compared to FY 2018-19.

Expenses: Total expenses of the Company increased from Rs. 23,050 M in FY 2018-19 to Rs. 29,977 M. Employee expenses accounted for 60% share of the Companys revenue, similar to the previous year. Other expenses accounted for 27% share of the Companys revenue in FY 2019-20, similar to the previous year.

• Tax Expense for FY 2019-20 was at Rs. 1,119 M compared to Rs. 539 M in FY 2018-19. The higher tax percentage was on account of the facilities coming out of the SEZ exemption on the exports in FY 2019-20.

Analysis of the Balance Sheet

Sources of funds

• The Total Assets of the Company increased by 7.6% from Rs. 24,976 M as on 31st March 2019 to Rs. 26,873 M as on March 31, 2020, owing to better profitability as compared to FY 2018-19

• The net worth of the Company increased by 10% from Rs. 17,135 M as on March 31, 2019 to Rs. 18,924 M as on March 31, 2020 owing to increase in reserves. The Companys equity share capital comprising Rs. 276.7 M equity shares of Rs. 2 each, increased from Rs. 548.3 M in FY18-19 to Rs. 553.4 M on account of increase in number of the shares due to exercise of Employee Stock Options.

• Except for lease liabilities of Rs. 1,140 M, the company is debt free as of March 31, 2020.

• The other financial liabilities came down from Rs. 3,155 M in FY 2018-19 to Rs. 1,932 M in FY 2019-20 on account of settlement of intercompany transactions (with KPIT Technologies Ltd) arising due to the merger and demerger effective January 1, 2019. The intercompany transactions are very insignificant as of March 31, 2020.

• Other Current Liabilities increased from Rs. 887 M in FY 2018-19 to Rs. 1,190 M in FY 2019-20 due to Forward hedge contracts and accrued employee cost

Applications of funds

• Fixed assets (net) of the Company were down by 2.3% from Rs. 1,444 M in FY 2018-19 to Rs. 1,411 M in FY 2019-20 due to reclassification as per Accounting Standard Ind AS 116, which was effective from April 1, 2019

• Goodwill went up from Rs. 4,219 M in FY 2018-19 to Rs. 4,541 M in FY 2019-20 on account of exchange gain.

Working Capital management

• Investments of the Company decreased from Rs. 1,909 M as on March 31, 2019 to Rs. 330 M as on March 31, 2020. The investments in liquid mutual funds were moved to Fixed Deposit with the Bank as a conservative safeguard against market volatility.

• Trade receivables went up from Rs. 7,108 M as on March 31, 2019 to Rs. 7,402 M as on March 31, 2020 as a result of growth in Revenues in Q4. However, the DSO of the Company reduced by 10% to 72 days of billed Revenues.

• Cash and bank balances of the Company increased from Rs. 3,617 M as on March 31, 2019 to Rs. 4,496 M as on March 31, 2020 on account of improved operational efficiencies on a YoY basis.

• Other Financial Assets decreased significantly by 81% from Rs. 1,938 M as of March 31, 2019 to Rs. 356 M as of March 31, 2020, due to reduction in inter-co balance with KPIT Technologies Ltd, which had arisen due to merger and demerger effective January 1, 2019.

Enterprise Risk Management

In compliance to regulatory requirements, Birlasoft has implemented a robust Enterprise Risk Management process duly benchmarked with industry standards.

Risks are assessed and managed at various levels at regular intervals with a top-down and bottom-up approach covering the whole Enterprise i.e. the Business units, the Geographies and the Enabling / Delivery functions.

Birlasoft believes in complete transparency with stakeholders and in line with these high standards of transparency, we are herewith sharing a summary of key risks and their mitigation plans.

Risk Event #1 Potential impact of COVID-19 on the global economy and organization

Risk Owner: CEO + CXOs

Description: Impact of COVID-19 on the human capital and financial health of the organizations due to significant cut on available budget to meet operational expenses, capital expenditure and discretionary spends at existing / potential clients level resulting in cancellation of RFPs / deals, asks for discounts, invoice deferments and cancellation of projects from existing clients. Additionally possible challenges in ensuring business continuity amid extended lockdowns and restriction in smooth supply chain process.

Mitigation plan:

Birlasoft management has proactively initiated multiple actions on ground to minimize the financial impact and ensure business continuity amid the various restrictions enforced by governments across various countries we operate in, i.e.

• Performing a comprehensive resilience framework at organization level to assess internal preparedness to deal with the pandemic

• Providing a comprehensive work from home solution ensuring security, meeting agreed contractual service levels and project milestones

• Regular communications with client leadership on the situations development

• Formation of management task force to regularly monitor and initiate corrective actions to manage emerging situation, as required

• Proactive proposals to clients to streamline operational parameters while mitigating service level risks is focused on reducing costs.

• Phased approach for resuming offices to ensure effectiveness and managing any further lockdown after resumption of services

• Cost optimization initiatives and reducing on discretionary spends

• Various initiatives on employee health and safety amid ongoing situation and after opening of office facilities

• Multiple actions to ensure Information security amid extending the work from home facility to employees

Birlasoft is well poised to take advantage of the opportunity emerging with the emergence of the COVID-19 pandemic and the resulting rapid adoption of digital enablement through transformation, cloud migration, IOT and mobility trends. Birlasoft has invested in digital labs to drive digital solutions in the area of process and discrete manufacturing.

Additionally, as a good governance measure, Birlasoft management has been providing regular updates to the Board on various business decisions and emerging situation and possible impact of the situation.

Risk Event #2 Potential risk of liquidity

Risk Owner: CFO

Description: Potential challenge in maintaining cash reserves and desired liquidity for managing various fixed and variable costs (i.e. employee payroll, vendor payments, facility management cost etc.) during COVID-19 situation which is expected to get extended for few quarters after lifting of lockdown restrictions.

Mitigation Plan

As evident from the financial results of the

Company for the year, Birlasoft has always followed very conservative and risk-averse policies and practices with regard to managing its cash and liquidity.

Annual Report 2019-20 : 19

Proactive cash flow and risk management practices have ensured that the Company always maintained a strong liquidity position, with a focus on ensuring adequate Cash balances held in the most optimal forms and geographies, backed up by various cash generation sources, including unutilized credit lines and off-balance sheet funding options. However, considering the uncertainty looming around due to the current COVID-19 situation, the Company has strategized and initiated various actions with an objective to enhance resilience in terms of working capital management. Few of such actions being a very strong focus on collection of its receivables (resulting in a 10% drop in its DSO), optimizing its people and other costs (reflected in a quarter-on-quarter growth in its operating margins), deferring discretionary spends and re-structuring its payables to ensure adequate liquidity in the system to meet the Companys financial commitments at any point of time.

Risk Event #3Concentration of business in specific geography / customer/ service line

Risk Owner: CBO + CDO

Description: The Company strategy is to focus on a select number of industry verticals, geography, customers and offerings, with a possibility of business being concentrated in a particular area with a consequential volatility.

Mitigation Plan:

The company mitigates this risk by maintaining a balance between various industry verticals, customers, geographies, offerings and making special efforts to grow the emerging businesses without compromising focus. The Company continues to have well spread service lines and healthy proportion mix of revenue generation from digital service line. Our focus would be to continue investing to increase our revenue in support and maintenance. Partnerships with established ERP product companies has broadened the customer base and offerings, which will assist in new customer acquisitions and expansion of business.

Risk Event #4 Impact on business due to stiff competition in the market

Risk Owner: CBO + CDO

Description: Given the dynamics nature of the IT services industry in which the company operates, it faces risk of competitors providing new offerings / new business models, pricing pressure, consolidation of mid-tier IT companies, etc., which pose challenges to growth and margins.

Mitigation Plan:

The Company has launched a comprehensive Challenger model to drive growth of top multiservice accounts with a key focus on Client management, monitoring of cross-selling and business transformation revenues while deepening and expanding the client relationship model. The Company is also focusing on widening the service technology offerings that compliment and align with the business imperatives of the customer, which helps in building annuity revenue and long-term client relationships. Strategic tie-ups are also being continuously evaluated with an objective to manage competition, enhance technological competence and grow inorganically.

Risk Event #5 Technological Disruption - Adaptation to new technology offerings

Risk Owner: CBO + CDO

Description: Rapid transformation in technologies like robotics, cognitive technologies, machine learning, cloud, digital etc., has significantly impacted business models. Delay in adaptation to new technology offerings will have adverse impact on future growth of the business, cost management and in maintaining healthy growth in revenues.

Mitigation Plan:

The company continues to invest in building functional capabilities (Digital, Data Analytics etc.) in a more focused way and with swiftness and agility. The focus on building functional capabilities in desired verticals and focused industries continue while investing on new technologies relevant to customers to enhance capability providing a platform to drive initiatives related to customer retention, mining and new customer acquisition. Simultaneously the timely assessment of various strategic tie-ups / merger activity to assist the organization in quick adaptation to the emerging technology and enhance its footprints in new demography.

Risk Event #6 Data Privacy risk related to global privacy regulations

Risk Owner: CISO

Description: Privacy and protection of personal data is an area of increasing concern globally. Legislations like GDPR in Europe, CCPA in US and PDPB in India has severe consequences for non-compliance or breach. Ensuring data privacy through every stage of information life cycle (collection, storage, processing, retention and disposal) has become critical. Any violation or security breach observed non-compliance or inadequacy of privacy policies and procedures can result in potential liabilities, penalties and reputational impact.

Mitigation Plan:

The Company has a well-defined and matured Privacy Framework with coherent policies, procedures for diverse privacy requirements and to ensure requisite compliances. Established governance mechanism exists to measure the efficacy of the privacy program through regular metrics and monitoring. The company follows best practices to support and include privacy by design concept in privacy environment. Some of the technical and Organization measures are PII Repositories, Privacy Impact Assessment, Incident Management Procedures and Systems, Breach Notification Management, Subject Access Request Management etc. Additionally, the Data Privacy controls have been assessed by external experts for compliance in line with the requirements of GDPR regulation. Company is continuously improving operational culture within the organization to address dynamic privacy risks with emerging technologies. The organization has embarked on a journey to obtain ISO 27701 certification in 2020 which is an extension of existing ISO 27001 standards.

Risk Event #7 Cyber security related risks

Risk Owner: CISO

Description: As companies embrace new technologies such as mobile computing, internet of things and cloud computing etc., cybersecurity is perceived as important risk. With the dynamic threat landscape of highly technical nature, there are possibilities of sophisticated targeted attacks, increasing ransomware threats, malware, data leakage and other security failures. The current scenario of COVID-19 has also brought in the need to have adaptive technologies in the cyber space to enable the "work from home" option. With all this, we can surely expect not just an increase in current threats but also completely new ones.

Mitigation Plan:

The company has a matured Information Security Management System with Policies, Processes and Controls to minimize the Cyber Security risks. The governance and management of security compliance and risk is reviewed periodically; evident with the sustained ISO 27001:2013 certification and external third-party validation of compliance to NIST Cyber Security framework.

While we continue with our Intrusion prevention systems, data loss prevention and vulnerability management program through the offensive COE, encryption, patch management etc. newer tools that are aimed at Cyber threat protection like cloud native end point protection platforms will be implemented. The SOC, which extends to all the offices globally, continues to track, monitor and ensure that all the wheels in this Cyber framework work turn smoothly.

Risk Event #8 Resourcing related risk with reference to employee retention, succession, development and training

Risk Owner: CPO

Description: The nature of the IT services business mandates the Company to recruit and retain professionals with requisite skill sets, adequate to meet customer demands and in alignment of companys long-term business strategy. Less or under-proficient resources or delayed or absence of availability of the required resources could result in loss of business opportunities or delivery escalations from the customers.

Mitigation Plan:

The Company has an effective talent acquisition function, which devises strategies to attract qualified and skilled professionals from various talent pools tapped through various sources. HR, in close alignment with business, ensures that there is a robust selection process to identify and evaluate the ‘right skilled resources.

The company continuously makes considerable investments in developing a robust training infrastructure, which ensures continuous skill enhancement and competency development for all deployable resources.

The Learning and Development team is also geared to cater to any business or project specific skilling needs through in-house or external training programs. Additionally, company also maintains a healthy strength on-bench to ensure timely availability of resources. This ensures that the delivery teams have the ‘right and multi skilled resources to deliver quality services to our customers. The company has various employee engagement and development programs across the levels i.e. ‘Top Talent, to help engage and retain good talent within the organization.

The Company places great emphasis on succession planning for critical roles to ensure risk mitigation and business continuity. The business leadership has set up an agile process for identifying business-critical roles and identifying potential talent pool to fill these roles should the need so arise. The potential talent pool undergoes a regular rigorous process of evaluation and readiness-assessment including psychometric assessments, multi-stakeholder feedback and six-monthly talent reviews. Individuals get to build IDPs and work through a continuous improvement program built around feedback and coaching.

Risk Event #9 Change in immigration laws of the geographies in which the company operates

Risk Owner: CPO

Description: Changes in the local immigration laws in some of countries that Birlasoft operate in, may adversely impact mobility of resources, which is critical for the successful ongoing business. These regulatory changes may disrupt the availability of required resources in some geographies / client locations and organizations ability to cross-deploy and optimally use the resources.

Mitigation Plan:

To address some of these issues, the company increased its intake in these markets by focusing on engaging local talent and reduce dependence on resources on work visa. The Company is also engaging with some customers to increase off-shoring of some roles to reduce onsite requirement to address the resource mobility issue. The company is continuously monitoring the changes in local immigration law or guidelines to ensure that we are in compliance and also to work with business teams to mitigate the impact, if any.

Risk Event #10 Challenges in integrating entities post M&A

Risk Owner: CXOs

Description: During fiscal 2018-19, the Company underwent a merger which was completed during January 2019. Considering the size of strategic alignment, it is imperative to integrate these 2 entities in terms of culture of the organization, application landscaping, people, processes and policies.

Mitigation Plan:

Birlasoft formed a core team of senior resources across the verticals with an objective to drive the cross section and cross vertical integration and ensure smooth transition. Various important steps were taken by the core team to ensure people, process and technology alignment across these entities and emerge as a unified entity with uniform organizations culture. A stringent process is designed and implemented for meticulous monitoring over the harmonization. Risk management team assisted in performing a risk assessment and in mitigating various key risks. Timelines defined and the integration project is currently on track. Birlasoft management has defined timelines in Q1 or early Q2 to GO LIVE on one system for the entire organization followed by policies and processes harmonization. Though the core transition team is working dedicatedly to ensure timely transition however there is a potential of marginal delay in case of further extension of lockdown scenario under ongoing COVID-19 Pandemic.