Foreign exchange risk management by Indian IT companies:an empirical analysis

The increased volatility in the foreign exchange market in recent years has increased the foreign exchange risk faced by companies worldwide. This phenomenon holds good in the Indian context also. This paper tries to report on the foreign exchange risk-management practices among Indian IT (information technology) companies. The results are consistent with expectations that foreign exchange risks faced by Indian IT companies is very high especially in the light of the recent appreciation of the rupee against the USD and most of the companies are using all the available techniques to mitigate the risks. The evidence suggests that the forward cover is the most widely used derivative instrument in managing the risks and the respondents taking part in the survey believe that the government is failing in maintaining a stable exchange rate.