11. Derivatives

The Company conducts a large portion of its operations in international markets, which subject it to foreign currency fluctuations. The most significant foreign currency exposures occur when revenue and associated accounts receivable are collected in one currency and expenses to generate that revenue are incurred in another currency. The Company is also subject to wage inflation and other government mandated increases and operating expenses in Asian countries where the Company has the majority of its operations. The Company’s primary inflation and exchange rate exposure relates to payroll, other payroll costs and operating expenses in the Philippines, India, Sri Lanka and Israel.

In addition, although most of the Company’s revenue is denominated in U.S. dollars, a significant portion of total revenues is denominated in Canadian dollars, Pound Sterling and Euros.

The Company was previously following hedge accounting guidelines and formally documented all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. However, commencing November 2020, the Company discontinued this practice. The Company does not hold or issue derivatives for trading purposes. All derivatives are recognized at their fair value and classified based on the instrument’s maturity date. The total notional amount for outstanding derivatives was $5.8 million and $6.9 million as of March 31, 2021 and December 31, 2020, respectively.

The effect of foreign currency forward contracts designated as cash flow hedges on the condensed consolidated statements of operations for the years ended March 31, 2021 and 2020 were as follows (in thousands):


	For the Three Months Ended
	March 31,
	2021		2020
Net gain (loss) recognized in OCI(1)	$	—	$	(166)
Net (gain) loss reclassified from accumulated OCI into income(2)	$	—	$	(5)
Net gain recognized in income(3)	$	—	$	—

⁽¹⁾

Net change in fair value of the effective portion classified into other comprehensive income ("OCI")

⁽²⁾

Effective portion classified within direct operating costs

⁽³⁾

There were no ineffective portions for the period presented.