Because of the globalisation and international growth of Indian companies, it is more critical than ever

that Indian pay attention to the most recent global developments regarding risk management

elsewhere. Among the key findings and trends now emerging in India with regard to Enterprise Risk

Management (ERM) are the following:

Strategic risks have not typically been considered in the early stages of building ERM at Indian

companies

Most of the risks continue to be arranged in silos, whether in business units or in functions. This

approach does not take advantage of the holistic approach that ERM can bring to risks that cross

businesses

Other than few financial institutions, few Indian companies have developed sophisticated risk

metrics. Even at financial institutions, risks are usually monitored by class of risk such as credit

risk or market risk, rather than holistically across the institutions.

Much of the focus ERM in Indian companies to date has been on the downside risk, not the

opportunity side of the equation. ERM may bring the necessary cultural change to identify

opportunities and their associated risks and rewards.

ERM has created greater transparency both internally and externally at those companies that

have embraced it. Communication within the company has improved by adding new perspective

on risk and sharing risk information. Communication with shareholders and other external risk

management stakeholders has also improved through more thorough disclosure.

The value proposition for ERM is not yet evident for most Indian companies since most

companies and boards that have begun ERM are doing so more as a compliance one than a

strategic one.

Evolving legal standards make it prudent for business organisations operating in the Indian

financial markets to strengthen their ERM process.

QUESTION ONE [20 MARKS]

Identify and explain the benefits of risk management mentioned in the Indian case study above. Discuss

other benefits of Enterprise Risk Management (ERM) which Indian firms will realise if they fully implement

ERM.