Regulatory compliance and operational concerns are the main risk areas for corporate India, according to new research by ICICI Lombard General Insurance.
Its Risk Management in India Inc report, prepared based on online interviews with 130 C-suite risk officers, also found that geopolitical uncertainty, attracting and retaining skills and sustaining market share rounded up the top five risks perceived by local businesses.
"While the key risk areas perceived by India Inc include regulatory compliance (53%) and operational concerns (50%); 27% of the respondents believe geopolitical uncertainty to be a risk factor," said the study, adding that 23% claim uncertain economic growth can lead to increasing risks.
Interestingly, only 23% respondents perceived information insecurity as a key risk, while only 11% believe technological disruption was a risk area," it said, adding that this could be because of the limited risk exposures that companies would have experienced directly.
Risk management practices
The study showed Enterprise Risk Management (ERM) as a mechanism that combines culture, capabilities and practices with strategy setting and its execution to manage risks in order to create, persevere and realise value.
A majority (88%) of organisations claimed that supporting strategic business decisions has been one of the key drivers for ERM implementation. 73% of organisations have been equipped with risk governance framework for more than three years, whereas 20% have incorporated a risk governance mechanism in the last three years and only 7% have introduced the same in the last year. In addition, 72% of organisation have clearly defined Key Risk indicators (KRI) but integrating KRI with business was found to be only prevalent among 41%.
The study also found that while most firms use a mix of qualitative and quantitative tools, only one in three deploy advanced analytical tools. And approximately that same number (35%) of organisations still rely on spreadsheet platforms in risk management. Risk leaders appreciate the importance of “risk culture” and undertaking risk culture assessments, with a majority of 64% who perform risk culture diagnostics. 81% have defined risk appetites.
To move towards strategic risk management
In general, the study concluded that there is a high level of adoption of risk management by Indian companies, but only few have managed and integrated best practices into the system. Implementation needs to be carried out more in terms of compliance adherence, and integration with technology tools has yet to happen across the board.
"With the emerging global uncertainties coupled with technological disruption, it is need of the hour for organisations to equip themselves with a well-defined enterprise risk management framework," said Mr Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance.
Risk management is not limited to identifying the risk elements or risk indicators, but aligning them strategically with business decisions to maximise the security of the firm, he added.