Page 27 - Banking Finance April 2019

COVER STORY

CHANGING CONTOURS

OF RISK MANAGEMENT

IN A DIGITIZED

FINANCIAL SPACE: THE

FUTURE STARTED

YESTERDAY

Excerpts of speech delivered at Risk Management
Summit ‘Risk Management Challenge in New Era’
organised by Risk Management Association of India

Introduction 1. Risk is generally defined as the probability of not
achieving the objectives. A simple definition but
The revolutionary idea that defines the boundary between
organizations across the world are finding it difficult to
modern times and the past Is the mastery of risk : the notion
identify advanced ways to manage the risk. This is
that the future is more than a whim of the gods and that
especially so as the organizations are working in an
men and women are not passive before nature.
environment described by Vulnerability, Uncertainty,
Complexity and Ambiguity (VUCA).
In a world where every event is identical to a previous event
no change would ever occur. 2. I will share my views on how we can demystify the act
of risk management and with the use of digitization can
improve it and add value through the process. Then I
Without numbers, there are no odds and no probabilities;
will discuss the risks arising out of digitization and the
without odds and probabilities, the only way to deal with
regulatory framework evolving in this area.
risk is to appeal to the gods and fates. Without numbers,
risk is wholly a matter of gut. Gaining Competitive advantage through
Peter L. Bernstein
Risk Management - Importance
About the author 3. The banks’ primary function is to act as intermediaries
between depositors and borrowers. The return on this
Dr. Rabi N Mishra
Principal Chief General Manager activity depends on two things. One, the risk-free rate.
Risk Monitoring Department Second, the risk being taken called the risk premium.
Reserve Bank of India 4. Now consider two banks. One with very advanced and
the other having very primitive risk management

BANKING FINANCE | APRIL | 2019 | 27