DISCUSS the reasons behind dropping of a profitable client by RIL.
CA Final · Integrated Business Solutions (Multidisciplinary Case Study) · MTP · September 2025
DISCUSS the reasons behind dropping of a profitable client by RIL.
Suggested Answer and Working Notes:
With increasing completion, dynamic market changes, changing needs of customers, non-financial and ethical considerations have gained relevance in the decision-making process. A company may face the dilemma of meeting customers' needs while protecting employees' rights. While there are no clear-cut parameters to measure the impact of such decisions, they have a long-term impact on the company's operations that ensures profitability and sustainability of an organization. In the given scenario, a customer who contributes close to 30% of RIL's Profits has been making turnaround demands that are unreasonable for the company employees to meet. RIL has to decide whether to continue doing business with the customer based on the current terms or protecting the work environment of its employees. In the current scenario, it is in RIL's long term interests to protect its employees' rights (a non-financial consideration). Keeping this approach in mind, RIL decided to terminate business with the profitable client. While this had a significant impact on revenues in the short term, in the long run RIL was able to get business from new clients. Also, realizing the value of service provided, the dropped client came back with projects on equitable terms. Therefore, even though it did not make financial sense in the short run, decisions based on non-financial metrics played an important role in ensuring RIL's long term sustainability.
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