Vijay joined Comp-X as Treasury Manager after his PGDM at one of Kochis

leading business schools. Comp-X was primarily in the business of processing and
exporting food products with an annual turnover of Rs 300 Crores and a PAT of Rs
12 Crores.
The breakup of annual turnover is approximately as follows:
USD 40 Million
Euro 7.5 Million
Its markets and invoicing is approximately as follows :
US/Canada USD 30 Million
Australia USD 5 Million
Europe USD 5 Million & Euro 7.5 Million

Sales are largely evenly spread out throughout the year but its purchase of raw
material is seasonal . While 80% of its raw material is indigenous, 20% is
imported.
Imports take place as follows :
April-June USD 5 Million
July Mar USD 2 Million
Order booking patterns are as follows:
Apr- Jun 40%
Jul-Sep 20%
Oct-Dec 10%
Jan Mar 30%

60% of the orders taken are for shipment through the year and 40% are spot
orders for execution within a month.
About 20 enquiries are received / offers are made to customers every day of
which 10 may get converted to orders.

The breakup of export value transacted through different modes is as follows:

Cash against documents through bank 45%
Documents in trust with 90 days credit from bill of lading date 30%
Advance payment 25%
Comp-X has a reasonably good track record of collecting its debts (bad debts is
almost non-existent) though there is a delay of 15-20 days from agreed payment
terms in about 10% of the cases.
Pricing is based on quotes made to customers which are negotiated over 3-10
days finalization . Raw material costs including imports vary daily and pricing
uses the prevalent RM rate at time of quoting. Exchange rates prevalent (spot or
forward) on the day of quoting are used for converting to foreign currency quoted
price .
There are times when Marketing tells Finance (10% of the time) that they are
finding it difficult to match the prices offered by competition in India and
requesting for a more favorable exchange rate assumption they could use for
pricing .
The production cycle is around 7 days and shipment takes 5 days after that to
complete quality tests and clearances .
Comp-X has adequate banking facilities to meet all their working capital
requirements and will not have a problem getting additional facilities due to its
good track record and credibility with banks.

They have the option to borrow either in USD at 3% , Euro at 4% or in INR at 10%
(per annum) . In all cases, the loans have to be settled within 180 days .

Vijays first task on the job is to :

1. Document the process flow of the business based on the above data.
2. Identify , define and document in detail the risks involved in the business
based on the above data and process flow.
3. Identify and document ways of avoiding / minimizing risks as documented
in point 2 .
4. He has been asked to also evaluate whether any of his risk management
suggestions have the potential to hurt profitability and competitiveness.
5. He has been also told that any other strategic suggestions he has to change
the business model are also welcome.
Vijay has to present his report as a crisp but comprehensive 20 minute PPT at a
meeting of the Management Committee of the company as well as submit a
detailed report as a document (PPT to be based on highlights of this) . He has
been adviced that he should have his logic and reasoning clear since he will be
questioned on his findings and recommendations at the meeting .

Vijay knows that he is going to be evaluated closely by the management

committee based on this presentation and wants to ensure that he is as
comprehensive as possible, comes up with useful and practical suggestions with
clear thinking and logic ,keeping the overall business perspective in mind.