Globant GLOB Business Risk Report

I. Market Risks

A. Competitive pressure in the IT services industry: Globant faces significant competitive pressure in the fast-evolving IT services sector. Continuous technological innovations and the emergence of new players keep the market highly competitive, which can impact Globant’s market share and pricing strategies.

B. Dependency on key clients for a significant portion of revenue: A substantial portion of Globant’s revenue comes from a limited number of key clients. This dependency makes the company vulnerable to the financial condition and business decisions of these clients, which could adversely affect Globant’s financial results if any significant client reduces or terminates their engagement.

II. Operational Risks

A. Data security and privacy breaches: Being a provider of IT services, Globant is exposed to risks related to data security and privacy breaches. Any significant breach could lead to financial penalties, loss of client trust, and damage to the company’s reputation.

B. Disruption in service delivery due to natural disasters or pandemics: Globant’s global operations could be disrupted by natural disasters or public health crises like the COVID-19 pandemic. Such disruptions could impact service delivery, client relationships, and ultimately, financial performance.

III. Financial Risks

A. Foreign exchange rate fluctuations: As Globant operates in various countries, it is exposed to currency exchange risks. Fluctuations in exchange rates can significantly affect financial results, particularly when converting foreign earnings back to the home currency.

B. Revenue and profit margin volatility due to project delays or cancellations: Delays or cancellations of projects can cause significant volatility in revenues and profit margins. Project-based work, characteristic of the IT services industry, usually involves tailored solutions that are susceptible to changes in scope or client needs.

IV. Legal and Regulatory Risks

A. Non-compliance with data protection laws: Globant must comply with diverse and increasingly stringent data protection laws across different jurisdictions. Non-compliance could result in legal penalties, including fines and damage to the company’s reputation.

B. Intellectual property disputes with competitors or clients: In the technology sector, intellectual property is a critical asset. Globant faces the risk of intellectual property disputes, which could lead to litigation costs and potential loss of proprietary technologies.

V. Strategic Risks

A. Failure to adapt to technological changes: The IT industry is characterized by rapid technological changes. Globant’s long-term success depends on its ability to continually adapt and innovate its services in alignment with emerging technologies.

B. Mismatch between business strategies and market trends: If Globant’s business strategies do not align well with prevailing or emerging market trends, it could lead to reduced demand for its services, loss of competitive edge, and diminished profitability.

VI. Risk Mitigation Strategies

A. Diversification of client base and revenue streams: Globant seeks to mitigate financial risks by diversifying its client base across different industries and regions, which helps stabilize revenue flows and reduce dependency on any single client or sector.

B. Implementation of robust cybersecurity measures: To manage data security risks, Globant implements stringent cybersecurity measures, including regular security audits and compliance checks to protect client data and maintain trust.

C. Hedging against foreign exchange rate risks: Globant uses financial instruments such as forward contracts and options to hedge against foreign currency risks, aiming to minimize the impact of currency fluctuations on earnings.

D. Regular compliance audits and training programs: The company regularly conducts compliance audits and trains its employees on legal and regulatory requirements to mitigate risks related to non-compliance.

E. Continuous monitoring of industry trends and technological advancements: Globant commits to continuous innovation and adaptation by actively monitoring industry trends and investing in new technologies, which helps align its business strategy with market demands.