In conversation with Alok Agarwal, Executive Director, ICICI Lombard General Insurance

To better index risk, corporations must align external and internal mitigation tactics. These will include better risk management of multiple environments as well as business factors, reducing business continuity risks, and retaining long-term vision from management to plan & implement. 

Can you brief as to what would be the major factor that would help the Corporate India Risk Index to go from optimised risk handling to a superior risk handling score?   

India Inc. has made significant progress in comprehending & appreciating the risks facing it and taking action to address them. Corporate India Risk Index 2021 was developed by calculating a corporate house's exposure and management of various risks across several sectors. This index assesses market and macro factors, operational & physical risks along with the risks related to technology and security.  

Among the factors that would help the Corporate India Risk Index transition from optimised risk handling to superior risk handling are:  

External environment 

• ‘Envisioning’ risk through tail-risk assessment, stress-testing, and scenario planning. 
• De-risking by focussing on multi-product, multi-geography, multi-customer, and multi-industry. 

Internal system & procedure 

• Preventable internal risks are managed through a rule-based control model. 
• Developing mission statement, value & belief system, standard operating procedure, internal control, and audits.

Leadership 

• Swiftly anticipating short-term changes and taking efficient steps to mitigate their impact. 
• Setting up the right tone and creating a conducive environment within which risk management is carried out.  

Predictive future analysis 

• Predictive analytics is used to provide organisation with actionable insights.
• Extrapolating insights and creating likely scenarios to predict future events. 

To better index risk, corporations must align external and internal mitigation tactics. These will include better risk management of multiple environments as well as business factors, reducing business continuity risks, and retaining long-term vision from management to plan & implement. 

Throw some light on how the infra and realty sector can revive its way back to being in the optimal risk index from the current position in the sub-optimal risk index?   

In India, each sector has some sector-specific areas in business that get overlooked. Reviewing or refreshing risk assessment should be a part of regular working practice to achieve superior risk handling. Companies should refresh their risk assessment, if there is any change in legislation, to stay compliant with both the local and central rules. Significant changes to workplace process, design, or introduction of new machinery or procedure are to prepare the company for the changing environment. In case of any injury/accident at the workplace or any reports/complaints should be immediately brought to attention and companies need to respond to the issue with a fresh risk assessment.  

Infrastructure and realty have fallen from optimal to sub-optimal while there was a marginal improvement in risk management practice. The risk exposure has grown significantly due to the financial risks, delay in execution of projects, and inflation.   

There are a few elements across organisations that need to be addressed with a more robust risk management plan. As in India, the overall business scenario is rapidly changing. Hence, companies should focus upon:    

• Efficient management and retention of talent by designing employee-friendly schemes as more millennials and Gen Z are entering the workforce. 
• With the Indian economy opening up like never before, the risk of global competition is also intensifying; Indian enterprises should adopt new efficient processes and technology to compete.                                            
• With the rapid adoption of social media and the rising digital quotient in India, enterprises with multiple customer touchpoints should be careful about the public sentiment as it can directly impact the brand equity of the company.  

What are your views regarding the attractive improvement exhibited by the transport and logistics sector showing a risk index of 69 in 2021 from 47 in 2020?   

As the pandemic and pandemic-related constraints eased up, sectors showed varied recovery as risk-related to resource scarcity, delay in execution of projects due to pandemic, and financial risks due to tax relaxation pacified. Among the findings in CIRI 2021, we found that sectors like transportation & logistics secured a score of 69, up from 47 in 2020. These sectors had minimal risk exposure as the intrinsic nature of their business exposes them to sector-specific risk. Moreover, the sector bounced back post-pandemic, owing to new strategic initiatives and business models.  

While business risks abound & their consequences can be destructive, there are ways & means to ensure against them, prevent them, and minimise their damage, if and when they occur. To accelerate the road to recovery, leaders need to instil a spirit both of purpose as well as of optimism and to make the case that even an uncertain future can, with effort, be a better one. Organisations need to take three steps in order to meet emerging challenges head-on: Understand, adapt, and engage!