Risks and Opportunities

Risks and Opportunities
Mitigating risk in a changing world

The external environment in which the Tata Motors Group operates presents multiple opportunities and risks, which the Group companies are prepared to manage proactively. Our robust risk governance structure not just evaluates the nature of risks, it also dynamically assesses their likelihood and significance. We closely monitor the impact of these risks on the value-creation ability of the Company.

Principal risks	Description	Consequences	Mitigation	Opportunities
COVID-19 and global economic conditions	The ongoing COVID-19 pandemic has caused a significant global economic downturn. We are exposed to changes in the global economic and geopolitical environment such as trade tensions and Brexit.	The COVID-19 pandemic and the resulting business disruption in several geographies where we operate could have a material adverse impact on our operations, liquidity, business, financial conditions and credit ratings. Changes in the external environment could also have a significant impact on the global demand for our vehicles as well as our global sourcing strategy and supply chain resilience.	We continue to closely monitor and risk assess global developments, implementing mitigation plans where appropriate. We also continue to maintain our international manufacturing footprint and a balanced retail sales profile across our key sales regions. Operations at plants have resumed with robust protocol and guidelines in place across the Company to ensure effective social distancing, hygiene and health monitoring. We are being nimble and agile to start delivering as soon as the demand comes back	Global economic growth in developed and emerging markets presents opportunities to increase sales. Global growth and rising incomes create opportunities both in new and existing geographical markets as well as new and existing segments. We are seeing encouraging recovery in China post the lockdown eases and expect other geographies to follow the same pattern.
Impairment of tangible and intangible assets	Designing, manufacturing and selling vehicles requires substantial investments in tangible and intangible assets such as R&D, product design and engineering technology. In addition, due to market challenges, our growth strategy may not materialise and product development cycles can be lengthy.	If the carrying amount of tangible and intangible assets exceeds the value of the business, it could have a material adverse effect on our financial condition and the results of operations.	Focused action plans including Project Charge+ and Project Accelerate for JLR and Turnaround 2.0 for TML aim at improving operational, financial performance and turnaround of business. Our strategy is focused on delivering positive free cash flow and generate cost savings and profitability improvements through the implementation of strategic programmes.	Delivering growth in revenues and profitability through strategic projects.
Supply chain disruptions, distributional channels and retailer network	We rely on third parties for sourcing raw materials, parts and components used in the manufacture of our products. Our ability to supply components to manufacturing operations at the required time is key to achieving production schedules. Further, in order to optimise market performance, our global sales and service channels must be aligned with the consumer demand through the appropriate mix of advanced and traditional methods.	Failure to deliver sales due to retailer capacity, poor service or capability will lead to uncompetitiveness within particular markets. The COVID-19 pandemic has led to significant disruptions in the supply chain and our distributors, dealers and retailers. These disruptions, if not managed, could have an adverse effect on production volume, sales, revenue, profitability, customer satisfaction and brand reputation.	The Group is working closely with its suppliers to monitor the risks by defining inventory salvation norms, building safety stocks and exploring localisation options, among others. Service technicians are being trained in product advancements. Digital channels such as online sales and remote servicing via SOTA are helping improve customer service. Market and retailer demand is closely monitored, in order to optimise our retailer network and invest in growth at the right place and time. The Group has undertaken several measures to support suppliers and dealers who have been impacted due to the COVID-19 pandemic.	JLR's robust and effective Supply Chain Risk Management governance framework provides it with the opportunity to proactively support and engage with its supplier base in diagnosing and mitigating potential disruptions before they occur. A network that is rightsized for the market will lead to efficient investment to optimise sales. Putting our customer first by quickly and robustly resolving problems will improve customer satisfaction and retention. Beneath all of this, the strength of our brands’ reputation in the market will lead to growth compared to the competition.
Credit rating and liquidity risks	External challenges and the COVID-19 pandemic have impacted the credit ratings of the Tata Motors Group. Credit rating agencies continually review the assigned ratings and these ratings may be subject to revision, suspension or withdrawal by the agency at any time. Maintaining adequate liquidity is critical to our business for running day-to-day operations and servicing our short-term obligations.	The COVID-19 pandemic has significantly raised the risk of credit rating downgrades across several sectors and countries. A downgrade in our credit rating may negatively affect our ability to obtain financing for our operations and capital needs. It may increase our financing costs. The COVID-19 pandemic may also increase pressure on liquidity of the Group and its subsidiaries.	We are routinely engaging with credit agencies. We have taken significant measures to shore up liquidity by way of issuing Commercial Papers (CPs) and Non-Convertible Debentures (NCDs) and revolving credit facility. We have sufficient liquidity to meet the unprecedented challenges. Actions are underway to significantly deleverage the Tata Motors Group. Cost, cash savings and capex rationalisation measures have been called out.	There are opportunities to rationalise costs, significantly eliminate non-value added activities and utilise resources in optimum manner. Recovery of economic activity post the COVID-19 pandemic can improve credit ratings and liquidity.
Intensifying competition and brand positioning	Brand positioning is becoming increasingly challenging, with pressures exerted by the dynamics of the automotive market (for example, automated driving, electrification and digital connectivity) and the intensifying competition and disruption from existing automotive manufacturers and new entrants.	Our potential inability to successfully position, maintain and articulate the strength of our brands as well as the failure to develop new products/ technologies that meet customer preferences, or suffering delayed product launches, could impact the demand for our products.	With key new launches across TML and JLR, whether it be the Nexon EV, the Harrier 2020 and the Altroz, or the new Land Rover Defender, Tata Motors Group is reinforcing its brand strategy and making focused investments to set industry benchmarks through its products. In addition, the Group regularly monitors the perception of its brands to quickly identify and address uncertainties that may arise, to inform how it articulates brand values to customers.	The Group continues to strengthen brands by creating greater brand association through innovation, technological advancement and customer trends and feedback to expand and evolve product portfolio and services. With a number of upcoming launches, the Group will further enhance customer offering through new/enhanced models and powertrain/feature innovation.
Reliance on key markets	We rely on certain key markets, including the UK, China, North America, India and continental Europe, from which we derive the substantial majority of our revenues.	A decline in demand for our vehicles in these major markets may, in the future, significantly impair our business, financial position and the results of our operations.	We have diversified our business across markets and product categories. Diversification across geographies helps mitigate the risk of country-specific challenges.	We intend to develop and are developing products to strengthen our portfolio to meet the increasing customer expectations. We continue to explore opportunities in new markets
Innovation and rapid technology change	Our future success depends on our ability to stay attuned to evolving automotive trends and to satisfy changing customer demands by offering innovative products in a timely manner and maintaining product competitiveness and quality.	Falling behind with technology trends will increase the risk of failure to meet the expectations of both our new and existing customers, as well as increase the risk of our products becoming relatively obsolete, impacting sales.	The Group continues to invest in R&D and to prioritise the development of technology enabling platforms and feature delivery. TML is working towards the consolidation of our future PVs on two architectures: Alfa and Omega. JLR is ensuring alignment with its Destination Zero mission and delivering experiences people love, for life.	The Group engages with the relevant industry and government partners to support the delivery of ACES technologies. In addition, TML's current products offer enhancements in the form of modular architecture, superior powertrain, lightweighting and system efficiency improvements.
Environmental regulations and compliance	Our production facilities are highly regulated and we may incur significant costs to comply with, or address liabilities under, environmental, health and safety laws and regulations applicable to them. The Group is subject to a rapidly evolving regulatory landscape with associated laws, regulations and policies that impact the vehicles we produce and our manufacturing facilities.	Violation of laws and regulations could result in the imposition of significant fines and penalties; the suspension, revocation or non-renewal of our permits; production delays or limitation; imprisonment; or the closure of our plants. We could incur additional compliance costs to avoid facing significant civil and regulatory penalties, and our competitors may gain an advantage by adopting new emissions-reducing and fuel-efficient technologies before we do.	The Group is committed to offering its customers a wide range of clean, sustainable propulsion technologies – whether petrol, diesel, plug-in and mild hybrids or EVs. TML has clearly prioritised EV capabilities and is one of the front runners in this industry today. JLR has invested substantially in the development of the Modular Longitudinal Architecture (MLA), advanced engines and electrification technologies. JLR retains an EU derogation permitting alternative fleet average CO2 targets.	TML has launched an all-new, feature-rich BSVI range of products. JLR was the first premium manufacturer to introduce a Battery Electric Vehicle (BEV) into mainstream production with the Jaguar I-PACE. JLR has introduced the PHEV technology in Range Rover and Range Rover Sport, with Range Rover Velar, Jaguar E-Pace, Land Rover Discovery Sport and Range Rover Evoque PHEV model being introduced in FY21. Going forward, JLR will have an electrified option in every nameplate. The introduction of manufacturing both EDUs and battery modules provides us with the opportunity to strengthen our in-house electrification capability.
Managing growth strategy and delivering on competitive business efficiency	As a part of the Group’s growth strategy, we need to open new manufacturing, research or engineering facilities; expand existing facilities; add additional product lines; or expand our businesses into new geographical markets that feature higher growth potential than many of the more mature automotive markets in developed countries.	If we are unable to deliver these objectives, our ability to achieve our financial targets may limit our capability to invest and fund future products and technologies. Any uncertainties that materially compromise the achievement of our objectives could unfavourably impact our operational and financial performance.	With the launch of Turnaround 2.0, TML intends to drive its journey towards Competitive, Consistent and Cash-accretive growth. JLR’s Project Charge and Charge+ have so far delivered £3.5 billion of cost and cash savings, with a further £1.5 billion targeted over FY21. Directed for the longer term, Project Accelerate aims to transform the business by improving sales performance, quality and cost efficiency of future products. Further, we are introducing our next-gen MLA and will continue to collaborate with partners to develop new technology.	Enhanced overall business efficiency will yield greater opportunities for growth and continued investment in our product portfolio and new technologies. Global economic growth and rising incomes create opportunities in both new and existing geographical markets and segments.