1. FOREX and FINANCE
Final Summer Internship Project Report for fall 2011 submitted to the
Department of Finance, International School of Business and Media, Bangalore
In Partial Fulfillment of the requirements for the
Post Graduate Diploma in Management in Finance
Submitted By:
MousumiGhosh
ID : 610016
International School of Business and Media, Bangalore
Submitted To:
V Naresh
General Manager – Finance & Accounts
The Global Green Group
# 14, 80 Feet Road, 4th Block, Koramangala,
Bangalore - 560034, INDIA
Office: +91-80-25536038;+91-80-25527217
Fax: +91-80-25536061
INDIA - BELGIUM - HUNGARY - TURKEY - U.S - DUBAI
Websites: www.globalgreencompany.com;
Acknowledgement

2. Apart from the efforts of me, the success of any project depends largely on the encouragement and
guidelines of many others. I take this opportunity to express my gratitude to the people who have given
me the golden opportunity to do this wonderful project and been instrumental in the successful
completion of this project.
I would like to show my greatest appreciation to my mentor and supervisor Ms. Priyanka Sur. I can’t say
thank you enough for her tremendous support and help. I feel motivated and encouraged every time we
sat down and brainstormed during the tenure of the project. Without her encouragement and guidance
this project would not have materialized.
The guidance and support received from all the members who contributed and who are contributing to
this project, was vital for the success of the project. I am grateful for their constant support and help.
Approval by Project Advisor
Project Advisor: _______________________________________________
Signature: _______________________________________________
Date: _______________________________________________
I hereby affirm that I have followed the directions and I confirm that this report is my own personal
work and that all material other than my own is properly referenced.
Student’s Name: ___________________________________________
Student’s Signature: ___________________________________________
Date: ___________________________________________
Abstract
Internship is a system of on-the-job training for white-collar jobs, similar to an apprenticeship. Interns
are usually college or university students, but they can also be high school students or post graduate
adults seeking skills for a new career; they may also be as young as middle school students in some
areas. Student internships provide opportunities for students to gain experience in their field, determine

3. if they have an interest in a particular career, create a network of contacts, or gain school credit.
Internships provide employers with cheap or free labor for (typically) low-level tasks. Some interns find
permanent, paid employment with the companies in which they interned. Their value to the company
may be increased by the fact that they need little to no training.
The foreign exchange market (forex, FX, or currency market) is a global, worldwide decentralized
financial market for trading currencies. Financial centers around the world function as anchors of trading
between a wide range of different types of buyers and sellers around the clock, with the exception of
weekends. The foreign exchange market determines the relative values of different currencies.
The primary purpose of the foreign exchange is to assist international trade and investment, by allowing
businesses to convert one currency to another currency. For example, it permits a US business to import
British goods and pay Pound Sterling, even though the business' income is in US dollars. It also supports
direct speculation in the value of currencies, and the carry trade, speculation on the change in interest
rates in two currencies.
In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a
quantity of another currency. The modern foreign exchange market began forming during the 1970s
after three decades of government restrictions on foreign exchange transactions (the Bretton Woods
system of monetary management established the rules for commercial and financial relations among
the world's major industrial states after World War II), when countries gradually switched to floating
exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton
Woods system.
Global Green Group deals in the foreign market while transaction is carried out from INDIA, BELGIUM,
HUNGARY, TURKEY, U.S and DUBAI. The project given is divided into four halves,
a. Make a report on booking/utilization and cancellation of derivative contracts (forward & option
both import and export) for the financial year of 1st April 2010 to 31st March 2011 which enable
the management to analyze gain or loss on treasury activities like booking/utilization and
cancellation of forward and options during the year and also reconcile the forex gain/loss with
the books of accounts.
b. Design a DOAM (Delegation Of Authority Matrix).
CONTENTS

4. Introduction ..........................................................................................................................................
1
About the company...............................................................................................................................
1
Projects Undertaken..............................................................................................................................
3
INTRODUCTION
This Project on Cancellation of forward contracts is an important document. I am providing this
information to ensure that you receive key information about our foreign exchange contracts, (also

5. referred to as Forward Exchange Contracts and Forward Foreign Exchange Contracts) to help you
understand the risks, benefits and costs.
Please note that this Project Statement is not a recommendation or opinion that particular foreign
Exchange products are appropriate for you.
Before entering into a foreign exchange contract we should give consideration to your objectives,
financial situation and need.
A forward exchange contract is an agreement between two parties to exchange a specified amount of
one currency for another currency at a specified foreign exchange rate on a future date.
A foreign exchange rate is the price at which one currency can be bought with or sold for another
currency.
All quotations are made up of two currencies: the ‘base’ currency and the ‘terms’ currency. A quotation
shows how many units of the terms currency will equal 1 unit of the base currency.
Example: Europe (Euro) against United States Dollar (USD)
EURO/USD 0.6660
Here, Euro is the base currency and US Dollars is the terms currency. One Euro is equal to
0.7804 US Dollar (78.04 US cents)
PURPOSE
Forward exchange contracts are used by market participants to set exchange rates for a future date.
Importers,exporters and investors commonly use forward exchange contracts to hedge foreign currency
cash flows.
A forward exchange contract can be:
• for a fixed term, such as months;
• for a fixed delivery date; or
• for a fixed term or fixed delivery date, but with an optional delivery period (in which case you can take
delivery at
any time in an agreed period leading up to the delivery date).
If you decide to enter into a forward exchange contract, you will need to tell us the term or delivery
date, as this will
identify when you want delivery of the currency. If you want a contract with an optional delivery period,
you will also
need to identify when the period is to begin
About Global Green Group
Global Green Group is a part of the USD 4 bnAvantha Group led by GautamThapar (Group Chairman).
With a global footprint and operations in ten countries, the Avantha group employs 20,000 people
belonging to 20 different nationalities. The group is in diverse fields such as paper and pulp; power

6. generation and distribution, power transmission and distribution equipment and services; food
processing; farm forestry; chemicals; infrastructure, IT and ITES.
lobal Green Group - the food division of the group is one of the sunrise companies within the group’s
Ginvestment portfolio. It has its customer-base in 50 countries across the world. The company is
professionally managed by AmrFarghal, CEO – Global Green Group, and supervised by the Board of
Directors, comprising of promoter(s) represented by GautamThapar and other leading professionals as
independent directors.
Global Green began operations 18 years ago with cultivation and export of gherkins in bulk through a
joint venture between the erstwhile Thapar Group (now Avantha) and PouponReitzel International (PRI).
In 1996, the GautamThapar-led Group acquired the
company and the new entity called Global Green
Company Limited came into existence. In 1999, it
acquired VST Natural Products, Hyderabad, which gave it
a foothold into the North American market. In 2006 it
made a significant acquisition of a Belgium-based company, Intergarden, which allowed it to penetrate
and develop the European market and simultaneously diversify into a new product portfolio. With this
acquisition, the company became the 3rd largest
Range of Products pickle packer in the world and also became a force
Pickles, Gherkins, India, Hungary to reckon within the industry. This was followed by
Cornichons another acquisition of a Hungarian based sweetcorn
Relish India manufacturing company – PusztaKonzervuzemKft.
Jalapeño, Red Peppers India, Hungary The overall sales of the group are spread in 50
Silverskin Onions Netherlands, countries across the world with its main focus being
Belgium in Western Europe and North America.
Cherries Hungary
Capers Turkey The company also processes and markets jalapeños,
Sweet Corn Hungary silverskin onions, pritamin
peppers, sweet & sour cherries,
and sweet corn, besides gherkins. In the Indian market, the company’s brand,
“Tify”, is uniquely positioned to meet the accelerated growth of retail and the
packaged food service industry, supplying to all leading QSR chains and Western
restaurants across the country. The brand is a preferred supplier to major chains
like Dominos, Pizza Hut, Subway, etc. Currently, Tify offers a wide variety of
products, ranging from salsa and pasta sauces, relishes, mayonnaise, ketchups, Saucepeno, etc. and is
available at all leading outlets across the country.

7. Ctrl + Click to follow the link to the webiste
Haryana Coated Paper Ltd.
lobal Green’s strategy differs from its competitors in that it has an integrated seed-to-shelf operation
Gthrough contract farming, state-of-the-art processing, and a robust supply chain that ensures
competitive pricing and precise delivery schedules that surpasses customer expectations. Global Green’s
stringent quality standards – which begin from seed selection, and continues through harvesting,
processing and to the final product –has earned it a reputation of reliability globally. The group has
manufacturing bases in India, Hungary, and Belgium that are strategically located from the advantages
arising out of agricultural, supply chain and customer viewpoints.. The
ultramodern equipment used by the company is specially designed for handling
very high volumes, low operational and maintenance cost, and complete product
safety.
Oblapura, Bangalore, India
his facility is located on the outskirts of East Bangalore. It largely caters to the European, Russian and
TAsia Pacific markets. It also services the North American market. The facility processes 15000 tons of
Gherkins annually in addition to 500 tons Jalapenos Peppers.
Venkatapur, A.P, India
This facility was set up in the year 1996, with most of the equipments, imported from Germany (Niko).
The factory has 40 Vats and a barrel preservation yard for Brining about 4000 MT of Greens. It is also
equipped with De-Brining Facility to bring down salt content to the desired level before packing.
Neelamangala, Bangalore
his facility was set up in 2001 and is located on the outskirts of Bangalore North West. It is a state-of-
Tthe-art high speed line that meets international standards. The plant processes both bulk and jars.
Most of its sales is to the European and Russian markets.
Dunakiliti, Hungary
his facility was set up in 1992 and is located in the North Western part of Hungary which
T is an excellent agricultural basin. This facility processes about 7500 MT of gherkin of
which about 2500 is grown on its own land using the latest faming and harvesting
methods. The factory also processes about 5000 MT of cherries and 400 MT of pritamin
paprika. The factory operations commence in mid-June with cherries and this is followed by gherkins
and pritamins till mid-October, after which only labeling activities take place.
Aalst, Belgium
his facility is located at Aalst, which is close to Brussels. This facility contains the Global Green Group
TEuropean office, labeling line and warehouse. This plant also packs the entire volume of Silverskin
onions which are sourced from Netherlands.

8. Istanbul, Turkey
loragarden has its plants at Tabriz and JulfaFreezone in Iran and purchasing depots at Uzbekia
FandKrygyzia with its Headquarters inIstanbul. Its main activity is the sourcing of capers and processing
of capers, which is done from May to September every year. It sourcing bases are Mohun, Krygyzia, Jalal
Abad, Osh, Uzbekia, Tashkent, Samarkant, Jizzax, Andican and Gumbet and these are processed at the
Tabriz plant.
Puszta, Hungary
usztaKonzervuzemKft was acquired by Global Green in Sep 2009. This factory is located IFS
Pin Eastern Hungary which is a major agricultural bowl of Eastern Europe. The plant HACCP
mainly processes Sweet Corn and Peas. It also does Gherkins, Peppers and some tomato BRC
based products. NFPA
ISO
Certifications: Quality and PD FPA
In India, Global Green operates three state-of-the-art, ISO and HACCP compliant Kosher
factories, located strategically in key growing areas. These plants are ISO 9001:2000 (OU)
certified. Additionally, the company has implemented robust traceability systems, which USFDA
ensure that it is possible to trace all greens and ingredients right down to its origin, so as CTPAT
to enable a quick and efficient product recall.
The company’s strong R&D team that monitors seed quality and improves
cultivation practices, constantly scanning for opportunities to source new
crops following which trial evaluations are carried out. A very stringent crop
monitoring is also followed at all buying points. All fresh products are packed
within 24 hours of harvesting to ensure good texture and consistent quality.
Each factory complies with all local legal and statutory norms. Food safety is
ensured by stringent HACCP implementation. In addition, X-Ray machines and
metal detectors are used to eliminate foreign body contamination.
lobal Green works with over 26,000 farmers to take their produce to the world market. Besides
Gproviding them with sophisticated technology and extension services, the company also invests in
educating them about efficient cultivation techniques that enhance farm income and productivity.
n India, Global Green contracts with farmers in the southern states of Tamil Nadu, Karnataka and
IAndhra Pradesh. In Hungary, 2500 MT is grown on company-owned land, utilizing best farm practices to
optimize quality and yields. One key advantage is that the factory in Dunakiliti, Hungary, is located in the
heart of one of the best agronomy belts in Eastern Europe.
G
6 World Class Manufacturing Facilities
Hyderabad,
Venkatapur Pickles, Relish, Jalapeño
India
Bangalore,
Neelamangala Pickles, Peppers
India

9. lobal Green is committed to Bangalore,
Oblapura Pickles, Jalapeño
environmentally sound business India
practices throughout all its plants. All Dunakiliti Hungary Pickles, Peppers, Cherries
activities are performed after taking Pickles, Capers, Silverskin
into consideration the minimization Aalst Belgium
Onions
of adverse environmental impact. The Floragarden Turkey Capers
company respects and complies with
the existing laws and regulations in the countries in which it operates.
About Avantha Group:
About Avantha: The US$ 4 bnAvantha Group is one of India’s leading business conglomerates. Its
successful entities include BILT, Crompton Greaves, The Global Green Company, Avantha Power &
Infrastructure, Solaris ChemTech Industries, Biltech Building Elements, Salient Business Solutions, and
Avantha Technologies. With an impressive global footprint, Avantha operates in over ten countries,
employing 20,000 people worldwide. The Group has business interests in diverse areas including power
transmission and distribution equipment and services, paper and pulp, energy and infrastructure, food
processing, farm forestry, chemicals, IT and ITES. Led by GautamThapar, Avantha demonstrates strong
leadership globally and emerges as a focused corporate, leveraging its knowledge, leadership and
operations, adding lasting value for its stakeholders and investors. For more information on Avantha
Group, please visit www.avanthagroup.com
People Philosophy and Work Environment
The company provides a workplace that nurtures each employee as an individual and an important
member of a culturally diverse, worldwide team. Themanagement team comprises professionals from
very diverse cultural backgrounds from across the globe that provides the necessary width and depth
required to meet all business challenges. The company believes that a diversity of people and ideas is a
business imperative and that diversity must be sought and nurtured.
Team members are encouraged to openly communicate and constructively disagree based on mutual
respect. Employees ensure that they when they make commitments, they keep them. Participation in
cross-functional teams, project assignments and lateral professional development create new challenges
and expand knowledge. Development goes hand in hand with training, but neither is a substitute for the
other.

10. The in-house umbrella brand of Global Green: TIFY

11. Projects Undertaken:
Project 1
Make a report on booking/utilization and cancellation of derivative contracts (forward & option both
import and export) for the financial year of 1st April 2010 to 31st March 2011 which enable the
management to analyze gain or loss on treasury activities like booking/utilization and cancellation of
forward and options during the year and also reconcile the forex gain/loss with the books of accounts.
Swaps, caps, and floors are recent innovations in the derivatives markets. The derivatives market
traditionally included forward contracts in addition to options (puts, calls, warrants). A forward contract
involved a commitment to trade a specified item at a specified price at a future date. For example, if an
American company will have need of 1 million British pounds six months from now they may avoid
exposure to exchange rate risk by entering into a forward contract for the pounds now. The forward
contract takes whatever form the two parties agree to. There is also a market for standardized forward
contracts, which is called the futures market. The standardization makes possible a wider market with
greater liquidity and efficiency. Often the futures markets eliminate the ties between specific parties,
the party and the counter-party, and the risk that the other might not fulfill the contract. In the futures
market everyone deals with the clearinghouse who guarantees fulfillment.
In the options market there has developed some terminology that is somewhat intimidating to the
uninitiated. A call option is the right to buy a share of a stock, the underlying security, at a specified
price, called the exercise price or the strike price. A put option is the right to sell a share of a stock at a
specified price, the exercise price or the strike price.
There is a limited time for the exercise of the call option. An American option can be exercised at any
time up to and including the expiration date. A European option can only be exercised on the expiration
date.
The project given to me required me to check the transactions in the balance sheet of the organization
in order to track the transactions which is has been either went forward and been cancelled. Drafting of
the contracts was also necessary for the organization for ready reference in the future, so the contracts
were segregated into a monthly basis.
The learning outcomes from the project were:
 To know when it is beneficial to cancel a contract or utilize it.
 Gained knowledge regarding foreign exchange rates.
 Segregate the contracts on monthly as well as bank basis.
 Reconciling gain or loss for the period April 2010 to July 2010 from the Legacy books of
accounts.
 Reconciling gain or loss for the period August 2010 to March 2011 as per SAP.
 Reconcile the amounts with the books only the cancellation.
 Segregate the amounts other than gain or loss on forwards and options contracts.
 Reconcile with the books month wise.
 Gained higher knowledge to work on excel sheet.
 Foreign exchange risk is the risk that an entity's impact of treasury activities on financial
performance.

12. Here is an overview of the draft which show 3 transactions of the company
Doc. Amount in Profit Reference Text
S.No. Bank Month Date local cur. L Curr Ctr
Cb- TT Forex - surrender of Towards exchange
Cash 22-Apr- foreign currency - diff. (68.10 - 72.00)
1 HO APRIL'10 2010 -1,624.00 INR 1099 VineetChhabra
Cb- TT Forex - curr.surrendered - Towards exchange
Cash 22-Apr- Santosh Nair diff. (63.10 - 59.20)
2 HO APRIL'10 2010 -1,156.00 INR 1099
Cb- TT Forexcurr. surrendered - Towards exchange
Cash 22-Apr- Naresh diff. (61.75 - 59.20)
3 HO APRIL'10 2010 -841.00 INR 1099
Global Green Group deals basically with two banks in the forward market, viz. SBI and Yes bank. The
above draft shows 3 transactions which is been cancelled by the company as it may suffer loss in the
long run. Through this draft we can manage the sale and purchase of forgein currencies
Identification of exposures based on the budgeted sales(month wise) and budgeted cash flow. This
Project helped me to know about forgein exchange rates and when to cancel or utilize a particular
contract be it a forward or spot.
In the event of too much unfavourable market, volatility cover the currency risk to the maximum extent
in order to protect budgeted rate. The monthly report of both these private sector and public sector
banks are reconciled thoroughly and are drafted.
The YES BANK report drafted:
1 YES Options OP32919 3/5/2009 USD 30/10/2009 470,000.00 oct '09
250,000.00
2 YES Options OP32919 3/5/2009 USD 11/26/2009 680,000.00 Nov' 0
250,000.00
3 YES Options 3/5/2009 USD 12/29/2009 Dec' 0
250,000.00 577,500.00
4 YES Options 3/5/2009 USD 1/27/2010 Jan' 1
250,000.00 121,228.00 673,772.00
5 YES Options 3/5/2009 USD 2/24/2010 Jan' 1
250,000.00 128,772.00 646,228.00
6 YES Options 1/18/2010 USD 2/24/2010 Feb' 1
150,000.00
7 YES Export 515016 2/16/2010 E/D 24/03/2010 3/31/2010 Mar'10
C/C 200,000.00 213,084.40
8 YES Options 1/18/2010 USD 3/29/2010 Mar'10
150,000.00 57,000.00
The SBI Report Drafted:

13. S. Ba Typ Contract Date Amt Due OS OS Amt mo Statu
No nk e Ref Curre Date Amt Rat (INR) nth s
. Na ncy (FCY) e
me
1 SBI Exp 0505310FP 5/21/ USD 21/06/ 6/30/ Canc
ort 0000242 2010 150,00 2010 2010 150,00 47. 7,064,2 Jun elled
Fw 0.00 0.00 095 50.00 e'
ds 10
2 SBI Exp 0505310FP 5/21/ USD 20/07/ 7/30/ Canc
ort 0000243 2010 150,00 2010 2010 150,00 47. 7,073,2 July elled
Fw 0.00 0.00 155 50.00 ' 10
ds
3 SBI Exp 0505310FP 5/21/ USD 20/08/ 8/31/ Canc
ort 0000244 2010 150,00 2010 2010 150,00 47. 7,083,7 Aug elled
Fw 0.00 0.00 225 50.00 ' 10
ds
4 SBI Exp 0505310FP 7/2/2 EUR 16/08/ 8/25/ Canc
ort 0000279 010 150,00 2010 2010 150,00 58. 8,790,0 Aug elled
Fw 0.00 0.00 600 00.00 ' 10
ds
10000000
8000000
6000000
Series3
4000000
Series4
2000000
Series1
0
Series2
September
November
August
December
February
July
January
June
May
April
October
March
-2000000
-4000000
-6000000
This Graph shows the gain or loss on treasury activities of the company during the financial year of April
2010 to march 2011.

14. The Final report compiled the entire transaction stating the transactions.
We generally work on Pre shipment credit and post shipment credit. These are available to the
exporters for financing, purchase, processing, manufacturing or packing of goods prior to shipment.
Types of Contracts:
1. Export Forwards
2. Options
3. Import C/C
4. Import Forwards
.Foreign exchange risk is the risk that an entity's impact of treasury activities on financial performance.
FOR CONFIDENTIALITY AND ORGANIZATION RULES, THE SHEET IS NOT INCLUDED

15. Skills Learnt
 Knowing about foreign exchange rates.
 When to cancel a particular contract.
 Make a proper sheet of the contracts segregating month and categorizing.
 Knowledge gained in working with Microsoft Office Excel.
 Managing the sale and purchase of foreign currencies.
Methodology
 Identification of exposures based on the budgeted sales (month wise) and budgeted cash flow
(month wise).
 Booking of forward contracts (hedging) in such a way that strike rate is above the budgeted rate.
 In the event of too much unfavorable market volatility covers the currency risk to the maximum
extent in order to protect budgeted rate.
Project 2
Tracking Of L.C Payments & Liability and Preparation of Service Distribution Invoices.
A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee.
A common type of bill of exchange is the cheque (check in American English), defined as a bill of
exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in
international trade, and are written orders by one person to his bank to pay the bearer a specific sum on
a specific date. Prior to the advent of paper currency, bills of exchange were a common means of
exchange. They are not used as often today.
Bill of exchange, 1933
A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the
person giving it, requiring the person to whom it is addressed to pay on demand or at fixed or
determinable future time a sum certain in money to order or to bearer. (Sec.126)
It is essentially an order made by one person to another to pay money to a third person.

16. A bill of exchange requires in its inception three parties—the drawer, the drawee, and the payee.
The person who draws the bill is called the drawer. He gives the order to pay money to the third party.
The party upon whom the bill is drawn is called the drawee. He is the person to whom the bill is
addressed and who is ordered to pay. He becomes an acceptor when he indicates his willingness to pay
the bill.The party in whose favor the bill is drawn or is payable is called the payee.
The parties need not all be distinct persons. Thus, the drawer may draw on himself payable to his own
order.
A bill of exchange may be endorsed by the payee in favour of a third party, who may in turn endorse it
to a fourth, and so on indefinitely. The "holder in due course" may claim the amount of the bill against
the drawee and all previous endorsers, regardless of any counterclaims that may have disabled the
previous payee or endorser from doing so. This is what is meant by saying that a bill is negotiable.
In some cases a bill is marked "not negotiable" – see crossing of cheques. In that case it can still be
transferred to a third party, but the third party can have no better right than the transferor.
Venkatapura and Oblapua facility was set up in the year 1996, with most of the equipments, imported
from Germany (Niko). The factory has 40 Vats and a barrel preservation yard for Brining about 4000 MT
of Greens. It is also equipped with De-Brining Facility to bring down salt content to the desired level
before packing. The state of the art facilities is responsible for the quality the organization delivers to
the customers.
A standard, commercial letter of credit is a document issued mostly by a financial institution, used
primarily in trade finance, which usually provides an irrevocable payment undertaking. The letter of
credit can also be a payment for a transaction meaning that redeeming the letter of credit pays an
exporter. Typical types of documents in such contracts include:
Financial Documents
Bill of Exchange, Co-accepted Draft
Commercial Documents
Invoice, Packing list
Shipping Documents
Transport Document, Insurance Certificate, Commercial, Official or Legal Documents
Official Documents
License, Embassy legalization, Origin Certificate, Inspection Certificate, Phytosanitary certificate
Transport Documents
Bill of Lading (ocean or multi-modal or Charter party), Airway bill, Lorry/truck receipt, railway receipt,
CMC Other than Mate Receipt, Forwarder Cargo Receipt, Deliver Challanetc
Insurance documents
Insurance policy, or Certificate but not a cover note.

17. All the charges for issuance of Letter of Credit, negotiation of documents, reimbursements and other
charges like courier are to the account of applicant or as per the terms and conditions of the Letter of
credit. If the letter of credit is silent on charges, then they are to the account of the Applicant. The
description of charges and who would be bearing them would be indicated in the field 71B in the Letter
of Credit.
Risk situations in letter-of-credit transactions
Fraud Risks
The payment will be obtained for nonexistent or worthless merchandise against presentation by the
beneficiary of forged or falsified documents.
Credit itself may be forged.
Sovereign and Regulatory Risks
Performance of the Documentary Credit may be prevented by government action outside the control of
the parties.
Legal Risks
Possibility that performance of a Documentary Credit may be disturbed by legal action relating directly
to the parties and their rights and obligations under the Documentary Credit
Force Majeure and Frustration of Contract
Performance of a contract – including an obligation under a Documentary Credit relationship – is
prevented by external factors such as natural disasters or armed conflicts
Risks to the Applicant
Non-delivery of Goods
Short Shipment

18. Inferior Quality
Early /Late Shipment
Damaged in transit
Foreign exchange
Failure of Bank vizIssuing bank / Collecting Bank
Risks to the Issuing Bank
Insolvency of the Applicant
Fraud Risk, Sovereign and Regulatory Risk and Legal Risks
Risks to the Reimbursing Bank
No obligation to reimburse the Claiming Bank unless it has issued a reimbursement undertaking.
Risks to the Beneficiary
Failure to Comply with Credit Conditions
Failure of, or Delays in Payment from, the Issuing Bank
Credit Issued by Party other than Bank
Risks to the Advising Bank
The Advising Bank’s only obligation – if it accepts the Issuing Bank’s instructions – is to check the
apparent authenticity of the Credit and advising it to the Beneficiary
Risks to the Nominated Bank
Nominated Bank has made a payment to the Beneficiary against documents that comply with the terms
and conditions of the Credit and is unable to obtain reimbursement from the Issuing Bank
Risks to the Confirming Bank
If Confirming Bank’s main risk is that, once having paid the Beneficiary, it may not be able to obtain
reimbursement from the Issuing Bank because of insolvency of the Issuing Bank or refusal of the Issuing
Bank to reimburse because of a dispute as to whether or not payment should have been made under
the Credit
Other Risks in International Trade
A Credit risk risk from change in the credit of an opposing business.
An Exchange risk is a risk from a change in the foreign exchange rate.
A Force majeure risk is 1. a risk in trade incapability caused by a change in a country's policy, and 2. a risk
caused by a natural disaster.
Other risks are mainly risks caused by a difference in law, language or culture. In these cases, the cargo
might be found late because of a dispute in import and export dealings.

19. Project 3
Report making on Cenvat
Cenvat, or the Central Value Added Tax, is a component of the tax structure employed by many
countries in the western section of Europe. The inspiration for Cenvat is derived from a tax system that
is generally referred to as VAT, or a Value Added Tax. Both Cenvat and VAT are designed with the
express purpose of minimizing a cascading effect when it comes to taxes on income, goods and services,
and other forms of tax revenue. The aim of Cenvat is to aid in maintaining a tax structure that is
considered equitable for both the citizens incurring the tax and the government that is collecting the tax
revenue.
One notable example of Cenvat can be found in India. Originally designated as a modified value added
tax, this approach placed some limits on the type of taxation that could occur on goods used in the
manufacturing process of finished consumer products. Modvat was later designated as Cenvat, and
continued to function as a means of promoting industry within the country while still receiving some
form of tax revenue from the effort.
It is helpful to think of Cenvat as an incentive that encourages the production of goods within the
country, rather than outsourcing the production to countries where the economic and tax climate is
more favorable. By providing a credit on the taxes associated with materials used in the creation
of finished goods, the government makes it more attractive for manufacturers to maintain operations
within the country. This of course leads to the creation of more jobs for the citizens within the
community and provides income for the purchase of products within the country. By reducing the tax
burden for the end user of the materials, Cenvat opens the door to a more stable economy within the
country, and a better standard of living for its citizens.
Under the best of circumstances, the application of Cenvat can accomplish three goals. First, the
structure for Cenvat requires a tax collection procedure that is fairly transparent and easy to follow.
Second, the benefits associated with Cenvat help to cut down on tax evasion and creative bookkeeping.
Last, the use of Cenvat ultimately leads to an overall increase in collected tax revenues by keeping more
citizens employed and thus able to pay taxes on salary and wages.
WHEN AND HOW MUCH CREDIT CAN BE TAKEN
The Cenvat Credit in respect of inputs may be taken immediately on receipt of the inputs.
1. The Cenvat credit in respect of Capital Goods received in a factory at any point of time in a given
financial year shall be taken only for an amount not exceeding fifty percent of the duty paid on
such capital goods in the same financial year and the balance of Cenvat Credit may be taken in
any subsequent financial year.
2. The Cenvat credit shall be allowed even if any inputs or capital goods as such or after being
partially processed are sent to a job worker for further processing, testing, repair etc. and it is
established from the records that the goods are received back in the factory within180 days of
their being sent to a job worker.
3. Where any inputs are used in the final products which are cleared for export, the Cenvat Credit
in respect of the inputs so used shall be allowed to be utilised towards payment of duty on any
final product cleared for home consumption and where for any reason such adjustment is not
possible, the manufacture shall be allowed refund of such amount.
CENVAT IF FINAL PRODUCT EXEMPTED

20. No Cenvat credit shall be allowed on any input or capital goods which is used in the manufacture of
exempted goods. This provisions shall not be applicable in case the exempted goods are either;
i. Cleared to a unit in a free Trade Zone.
ii. Cleared to a 100% E.O.U.
iii. Cleared to a unit in an Electronic Hardware Technology Parks or Soft ware Technology Park.
iv. Supplied to the UN or an International Organisation for their official use or supplied to projects
funded by them.
v. Cleared for export under bond.
CONDITIONS
Various documents have been prescribed on the basis of which a manufacturer can avail the Cenvat
Credit.
1. The Manufacturer shall take all reasonable steps to ensure that the inputs or Capital goods in
respect of which he has taken the Cenvat Credit are goods on which the appropriate duty has
been paid.
2. The Cenvat credit in respect of inputs or Capital Goods purchased from a first stage or second
stage dealer shall be allowed only if such dealer has maintained records indicating the fact that
the inputs or capital goods were supplied from the stock on which duty was paid by the
producer of such inputs or capital goods and only an amount of such duty on pro-rata basis has
been indicated in the invoice issued by him.
3. The manufacturer of final products shall maintain proper records for the receipt, disposal,
consumption and inventory of the inputs and capital goods and the burden of proof regarding
the admissibility of the Cenvat Credit shall lie upon the manufacturer taking such credit.
Shifting, Sale, Merger, Amalgationetc.of Unit
If a manufacturer shifts his factory to another site or the unit is transferred on account of change in
ownership, sale, merger, amalgamation etc., the manufacturer shall be allowed to transfer the Cenvat
credit lying unutilised to the accounts of such transferred factory.
UNUTILISED CREDIT
1. Any amount of credit earned by a manufacturer under the CENVAT Credit Rules. 2001 as they
excisted prior to the 1st day of March, 2002 and remaining unutilised on that day is allowable as
Cenvat credit and be allowed to be utilised.
2. A manufacturer who opts for exemption under a notification based on the value of clearances in
a financial year and who has been availing of the credit of the duty paid on inputs before such
option is exercised, shall be required to pay an amount equivalent to the credit in respect of the
inputs lying in stock or used in any finished goods lying in stock on the date when such option is
exercised.

21. EXPLANATION :-

22. Design a DOAM (Delegation Of Authority Matrix).
Authority matrix is fundamentally an arrangement where the decision making is
divided in different levels to empower specialized task. Accountability is directly
associated with the person who delivers the job. Responsibility would be from the
person who is responsible for the one who is delivering the job, i.e. the reporting
manager. Every job would require certain degree of indirect association, i.e. through
consulting where the employee may not be responsible for the end result yet require to
recommend. For e.g. in a technical firm the engineer would be accountable for
developing the product , the Project manager would be responsible for the project
completion, the subject matter experts may require to consult finally the senior
management needs to be informed about the job completion.