Risk Management Articles

Latest risk management articles to help you better understand the complex world of Risk management. If you would like to submit your articles of interest, do write to manoj.jain@riskpro.in and we will surely include your articles in this section.


Top risks for a BPO organisation

In global economic and financial meltdown, no industry is spared, and that includes the BPO industry of India. There were times when BPO organisations were sprouting all over the nation in the so called tier 2,3 4 etc cities. But what many did not realize is that along with a fantastic business model, there was also a need for good business and risk management practices.

Today, as losses mount across the globe, the absence of good risk management systems at these smaller organizations can be felt. Let’s take a look at what is missing in these organisations.

Is risk management department useful

Every global economic bolt reminds us of the pain of a receding economy and why risk management is ever more critical in today’s world. The recent Dubai debt crisis brings back the golden words of “Risk Management”. A year ago, the collapse of Lehman Brothers led to large scale meltdown making the world realize the importance of risk management, why risk management failed, why stress testing and models did not work etc.

Commodity trading Risk: Less or more

Commodity futures and options are more recent when compared to equity futures and options. They are also the lesser understood by the layman compared to their counterparts. But what people should realize is that commodity trading involves less risk compared to stock futures and options. This is because commodities involve an underlying that are essential to the existence of human beings. Take for example grain based commodity. The price of grains, say wheat, is based on demand and supply of grains.

Is Risk Management Dept adequately empowered to drive your organisation

Risk Management is an important role, but one that requires sufficient authority and empowerment to drive the change management needed. Often, risk management is highly regarded across the organisation, but when it comes to actual implementation of recommendations made by Risk Dept, there is often resistance or ignorance. And at times, the Business Units are simply not willing to initiate a dialogue with Risk despite knowing that risk management is an important aspect.

Careers in risk management

With so much happening around every person from every walk of life, one would believe that risk management career is the best option for a recent graduate. But that is not entirely true.

Agreed that risk management roles today are more value adding, more respected and more sought after compared to these same roles a few years ago. But the recent events don’t make these the best job options a person has. The candidate should continue to evaluate his interest in economy, finance and the corporate world and other options such as science, medicine, engineering etc.

Insurance recoveries as a tool to manage operational losses

To effectively monitor operational losses, apart from getting effective loss data, you also need data on insurance recoveries to be able to take effective risk management decisions. Amount of insurance recoveries provides insight into which loss event types are material, which loss event types are not covered by insurance policies or which loss event types result in low claim or settlement ratio.

Risk Consulting Firms in India

Indian landscape for risk management and risk consulting is fast changing. Besides the big consulting firms such as Ernst & Young, KPMG, Deloitte and PWC, a whole host of Indian software giants such as TCS, Wipro and Infosys and provide comprehensive risk consulting services in India.

But in our opinion, the best value for money for small to medium size companies is to hire risk consulting firms that are smaller in size and offer specialised services. Examples of such firms are Axis Risk, Protiviti, and us of course, RiskPro (www.riskpro.in)

Seven Pillars (best practices) of risk governance

1. Board should have needed expertise and be provided vital information
2. Strategy and risk appetite need to be well linked
3. Risk management should be considered as an independent function
4. Risk function should be strengthened with appropriate skills and talent
5. There should be clarity in risk management
6. Compensation and performance measures should be risk adjusted
7. Technology can make the needed difference

How to fraud proof your internal controls framework

By the time you finish reading this, you will be in a position to minimize frauds that occur a result of poor internal controls. But you will not be able to make these controls fool proof. Why? Simply because internal controls prevent or detect errors, frauds, failures etc, but are very much people dependent and so, although you might be able to design a strong internal control framework, there is no guarantee that these controls will be executed as originally designed.

Risk Appetite leads to good risk management practices

The golden rule for great risk management practices. Define and document the company’s risk appetite. Never start or continue to pursue business strategies without first clearly articulating what are the risk appetite statements for the organisation.

In a recent survey by Deloitte, it was noted that Indian banks do not have formal process to document their risk appetite statement. And as competent CROs would agree, defining risk appetite is the foundation of risk management and the strongest pillar for enterprise risk management.

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