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Shobha Kannan
Adith Charlie

Mumbai, Nov. 29 The recent Hexaware incident has prompted companies to take a hard-nosed look at derivatives reporting systems in order to minimise the associated risks and ensure maximum returns, analysts feel.

Till now very few companies have invested in derivatives risk management system to track these exotic products because of high costs and complexities associated with them.

“Most treasury employees of companies do not understand the implications of complex forex deals. In many cases, authorised company personnel lack knowledge about the ‘mark to market’ values of the products they deal with, thereby increasing their dependency on figures provided by banks,” said Mr Nandlal Bhatkar, CEO, Pyxis Systems

An exotic derivative could be anything ranging from a foreign currency option or a cross- currency option or a combination of derivatives.

Companies with exposure to external commercial borrowings, foreign currency risks and export receivables are the ones which go in for exotic derivative products. Sectors such as Oil & Gas, IT, metals, auto and auto ancillaries have more than 50 per cent exposure to such products, the report said.

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