Enterprise Risk Management at Indian Companies 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.

The answer should be structured as followed

INTRODUCTION:

Definition of risk management Include a reference. Definition of Enterprise Risk Management Include a reference

2 marks

BODY:

PART A

CASE STUDY SPECIFIC

Identify and explain the benefits of risk management mentioned in the Indian case study above. Identify the benefits and explain each benefit as followed 8 marks

Cultural changes to identify opportunities and their associated risk and rewards Communication between shareholders - result in better strategic decisions made to drive the company Communication between shareholders - result in better strategic decisions made to drive the companys objectives Holistic approach to the company and not just a specific functional area/department Transparency - management decisions are shared among others to benefit the company Provides effective coordination of legal, regulatory and compliance matters - regulation of risk, legal requirements It increases the effectiveness and efficiency of operations in a firm. Results in the development of sophisticated risk metrics - helps to monitor manage/measure, analyse/classify, Sophisticated risk metrics helps quantify if a risk is worth committing financial resources - profitability and sustainability of Indian companies Identifying risks helps the organisation to prepare them from facing uncertainties that can arise in future.

INTRODUCTION:

Definition of risk management Include a reference. Definition of Enterprise Risk Management Include a reference

2 marks

BODY:

PART A

CASE STUDY SPECIFIC

Identify and explain the benefits of risk management mentioned in the Indian case study above. Identify the benefits and explain each benefit as followed 8 marks

Cultural changes to identify opportunities and their associated risk and rewards Communication between shareholders - result in better strategic decisions made to drive the company Communication between shareholders - result in better strategic decisions made to drive the companys objectives Holistic approach to the company and not just a specific functional area/department Transparency - management decisions are shared among others to benefit the company Provides effective coordination of legal, regulatory and compliance matters - regulation of risk, legal requirements It increases the effectiveness and efficiency of operations in a firm. Results in the development of sophisticated risk metrics - helps to monitor manage/measure, analyse/classify, Sophisticated risk metrics helps quantify if a risk is worth committing financial resources - profitability and sustainability of Indian companies Identifying risks helps the organisation to prepare them from facing uncertainties that can arise in future.

S

Sustainability

O

Operational efficiencies and effectiveness

N

New products/services

I

Improved decision making

C

Competitive advantage

C

Customer intimacy

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

Transparency Communication Legal framework Reducing redundant processes The Strategic Approach of ERM and how that benefits Indian firms ERM Opportunities instead of Threats Strategic Planning Continuous Improvement SONICC

Globalisation and international growth Few shocks in the future (uncertainties)

Conclusion

Using ERM for strategic decision making as opposed to just compliance State that are downsides to ERM and not just the benefits Costs attached to implementing ERM

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

Transparency

Communication

Legal framework

Reducing redundant processes

The Strategic Approach of ERM and how that benefits Indian firms

ERM Opportunities instead of Threats

Strategic Planning

Continuous Improvement

SONICC

Globalisation and international growth

Few shocks in the future (uncertainties)

Conclusion

Using ERM for strategic decision making as opposed to just compliance State that are downsides to ERM and not just the benefits Costs attached to implementing ERM