Risk Management in India is mainly compliance driven

There are good practices of risk management. Then there are best practices for risk management. But have you heard of compliance driven practices of risk management.

Indian banks are adopting risk management frameworks, initiatives mainly due to the regulatory compliance to have these initiatives in place. altough many banks realize that having good risk management systems is a boon to overall business growth, banks still want to do only so much that will get them to comply with regulations.

After the 2008 financial crisis, one would expect that this trend would reverse and there would be more commitment of time, efforts, and money towards enhancing risk management. While this may be true for some organisations, it cannot be the case for a majority of the banks. This is because the recessions kept the banks from spending during cost cutting period and now that the times are better, the focus is back to business growth. Risk Management often seems to be ignored during bad times and good times.

The onus to improve the overall health of the financial systems lies on Reserve Bank of India and the regulatory authorities. These authorities are introducing new regulations that require enhanced risk management systems, changes to internal processes and implementing new risk management policies. These changes, in our opinion, will go a long way to indirectly infuse resources to risk management projects.

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