Indian companies now focusing on risk management
posted in Outsourcing News and Top Outsourcing deals, Outsourcing to India |Source: economictimes.indiatimes.com
NEW YORK: Intense global competition and rapid growth are forcing Indian firms to examine corporate enterprise risk management (ERM) elsewhere, especially in Europe, Australia and North America, where the process is more mature, according to a study.
ERM is a cohesive, enterprise-wide process allowing companies to identify, assess and respond to the social, political and economic risks of doing business.
The report by The Conference Board, a leading business research organisation, examines the state of risk management integration in companies based in India, and includes case studies of four major India-based multinational firms: Tata Motors Ltd, ICICI Bank, Tata Chemicals Ltd, and Dr Reddy’s.
“ERM is in the very early stages in India,” says Matteo Tonello, Senior Research Associate at The Conference Board Governance Center, and a co-author of the report.
“As Indian firms expand beyond national borders, they become exposed to more strategic and operational risks, including those from different geopolitical and cultural contexts.
Tightening capital markets, the internationalization of successful Indian companies and the adoption of global initiatives to promote business integrity are forcing many firms to pay attention to recent developments in risk management around the globe. Assimilating international standards of risk management is becoming a necessity to remain competitive, he adds.
Since 2004, the Board has documented steady progress to drive ERM into corporate practice and culture. Major progress is detected in early stage efforts, such as creating a risk inventory and adopting a cohesive set of assessment processes.
Companies headquartered in Europe or operating in major Asia-Pacific financial markets have advanced significantly in recent years and developed processes at a fast pace, indicating an international consensus on the benefits of risk management integration, it says.
There is also evidence of substantial differences in ERM maturity across industries with financial services, energy and utilities showing more developed ERM processes than other industries, it adds.
“The four companies examined closely in this report are more of the exception than the rule in India, where ERM is not widely used as a management tool,” says Ellen Hexter, co-author of the report.
“However, experience and research from other parts of the world show that those who are early adopters of ERM are likely to enjoy a competitive advantage.”
For many Indian firms, the report notes, most risks continue to be managed in silos, whether in business units or functions. Indian companies generally do not take a comprehensive approach that ERM embraces but that is beginning to change, notes the report.
Now that outsourcing has matured, it is no longer limited to single functions within specific business units, but involves entire corporate processes.
As a result, risk and governance issues surrounding outsourcing practices means they need to be addressed at the organisational level, it adds.
