Regulatory risk, cyber security and technology disruptions are the top risks that face businesses in India, according to a recent Deloitte survey.
The Deloitte Risk Survey 2018 surveyed more than 100 C-Suite stakeholders across diverse sectors to obtain an understanding of risk culture in India. It found that despite the risks, only 35% of the organisations had a high involvement of board of directors in risk management, reflecting the fact that many organisations are traditionally conditioned to approach risks and risk management with a reactive attitude.
The survey also found that there exists a divide on the way risk management is viewed among Indian organisations. According to the survey, 44% of businesses harness risks to find future opportunities and drive returns (a value-focused approach) while others (36%) use risk management with an aim to drive compliance and prevent losses.
This insight is further substantiated by the fact that regulatory risk (44%) still leads amongst the top three risk areas in India followed by cyber security (31%) and technology disruptions (25%).
The core reason for this trend, said Deloitte, is the fact that CXOs are considering regulatory compliance as a critical value protector exercise.
Interestingly, in three years from now, there is an expected shift in the top three risks, and cyber security (36%) takes the lead amongst the top 3 risks for businesses, followed by technology disruptions (33%) and regulatory risks (31%).
“The changing trend demonstrates that with digital transformation, organisations will now need to redefine strategies as they become susceptible to multiple threats emerging through technology disruption. While there are no surprises on the top 3 risks, we believe that the volatility and complexity of each of these risks will continue to increase. This essentially means that there needs to be a shift from being risk averse to risk aware, with the power of innovation,” said Deloitte India president of risk advisory Rohit Mahajan.
With the changing dynamics and the speed of business delivery, there is a growing demand for a dedicated Chief Risk Officer (CRO) position, though 39% of the organisations mention that risk management is the responsibility of each business/function, and there is no separate CRO role.
“However, the survey results indicate a positive change in the industry where 61% of Indian organisations now have a designated CRO. The CRO not only mitigates crisis for a firm, but in turn transforms them into opportunities of business growth and stakeholder confidence,” Mr Mahajan added.
Having a well-defined risk strategy is the first step in risk mitigation, said Deloitte, However, survey findings suggest that 12% of the organisations did not have a well-defined risk management strategy and 27% of the organisations were unsure of their risk management strategy.
Acquiring and nurturing risk talent is also an area of challenge for most businesses. 34% of the organisations surveyed had not reskilled their risk management team or moved personnel from business units into the risk management function to deal with the complex and rapidly changing business environment. Also, 40% of the organisations have less than 5 personnel as part of their risk teams.
Key learnings for Indian businesses:
- Risk and opportunity – a duality
Effective risk management is as much about value creation (opportunity) as it is about value protection (mitigating risk). Having the optimum risk framework and associated processes is important for developing the capability to recognize such opportunities.
For Indian businesses, there is a clear need to attract professionals with diverse skills, as also retrain and upskill the existing risk professionals.
Organisations also need to consider the role of external experts – academia, professionals, and experts, as well as the internal business teams, to augment risk related capabilities.
- Use technology to enable the risk function
Indian businesses must have their risk teams adopt and invest in technology and analytical tools as transformation to digital demands a strong tech-focused approach. Analytical tools can help businesses scan vast amounts of data and convert that into meaningful and actionable insights.