Page 50 - Risk Management in current scenario

The underlying reason for this phenomenon is that most of the Indian
working environment since Independence has been in the closed
economy where money is funded by the government. The government
is not a constraint for money as they can either increase taxes or as a
last resort, can print money. So, risk never came at the forefront of capital
management which is a prime concern in the private sector otherwise.

Over the last two-three decades of development of the corporate world
in India after liberalization post-1990, the focus of business houses has
been on business development from generating the top line. Also because
of insulation from the external world in the Indian economy, many of the
global events have not affected the country and therefore, the corporate
world has not witnessed the impact of the failure of risk management,
unlike what happened in 2008 global economic crisis to the rest of the
world.

The recent global crisis has brought risk management to the forefront
through improvement in the corporate governance structure world over.
It is getting understood that risk cannot be eliminated but can only be
managed. This is one of the key reasons that the development of risk
management is seen across the world as leading to strengthening of the
corporate governance structure.

The risk culture in modern-day India is at a seeding stage, not even
germination stage because most of the risk management is brought over
through the regulatory changes, especially in the financial sector. The
development of risk culture under these circumstances is bound to take
time as the behavior and attitude of individuals needs to be molded in
the pro-risk management direction.

Such risk culture development is not easy and quick as behavior and
attitude change takes a long time. The challenge that will be faced by
the Indian financial corporate over the next 5 to 10 years is resulting three
lines of defense model which is used by Companies as a part of
governance structure to enhance risk management.

48 | Risk Management in Current Scenario