Reference no: EM132654738

Because of the globalisation and international growth of Indian companies, it is more critical than ever that Indian pay attention to the most recent global developments regarding risk management elsewhere. Among the key findings and trends now emerging in India with regard to Enterprise Risk Management (ERM) are the following:

• Strategic risks have not typically been considered in the early stages of building ERM at Indian companies
• Most of the risks continue to be arranged in silos, whether in business units or in functions. This approach does not take advantage of the holistic approach that ERM can bring to risks that cross businesses
• Other than few financial institutions, few Indian companies have developed sophisticated risk metrics. Even at financial institutions, risks are usually monitored by class of risk such as credit risk or market risk, rather than holistically across the institutions.
• Much of the focus ERM in Indian companies to date has been on the downside risk, not the opportunity side of the equation. ERM may bring the necessary cultural change to identify opportunities and their associated risks and rewards.
• ERM has created greater transparency both internally and externally at those companies that have embraced it. Communication within the company has improved by adding new perspectiveon risk and sharing risk information. Communication with shareholders and other external risk management stakeholders has also improved through more thorough disclosure.
• The value proposition for ERM is not yet evident for most Indian companies since mostcompanies and boards that have begun ERM are doing so more as a compliance one than a strategic one.
• Evolving legal standards make it prudent for business organisations operating in the Indianfinancial markets to strengthen their ERM process.

QUESTION ONE

Identify and explain the benefits of risk management mentioned in the Indian case study above. Discuss other benefits of Enterprise Risk Management (ERM) which Indian firms will realise if they fully implement ERM.