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The New Dimensions Of Risk Management

Monday, August 10, 2015

Risk Management has come a long way from the trading floor and the Basel Accords of 1980’s and 1990’s. Global securities markets have expanded and both exchange traded and over-the-counter derivatives have become major components of the markets. These developments, along with technological breakthroughs in data processing, have gone hand in hand with changes in management practices and lead to a movement away from management based on accrual accounting toward risk management based on marking-to-market of positions. In light of current events, Risk Management is now, more than ever, at the forefront of organizational learning, yet it is still hard to grasp from a perspective of execution and day-to-day management. So how do companies tackle it? A host of experts in the Risk management business got together last week in Mumbai to unravel the complexities of Risk management. Dominic Rebello Reports.

“Managing risk for a business is inherent to its success. It’s not only about risk models and systems but also about a culture that fosters informed decision making which will ensure long term viability” said Nikhil Barshikar, Founder & Managing Director, Imarticus Learning. He was addressing a gathering of over 100 corporate and business personalities at a seminar hosted by Imarticus that primarily addressed the the three major types of Risk -Market, Credit and Operational.

The Credit Risk Panel consisted of Arun Kumar Iyer, Director, Risk Solutions, CRISIL, Ashish Agarwal, Chief Risk Office, Yes Bank, Loknath Mishra, General Manager ICICI Bank, Somak Ghosh, Managing Partner, Contrarian Fund & Founding Member Team, Yes Bank and Shalinee Mimani, Chief Risk Officer, Edelweiss.

“The Credit Crisis of 2008 didn’t Impact India much as it was a more of a Global crisis and we were better off domestically. A lot of it was because of proactive, forward looking ways of Risk Governance Framework that RBI always had,” said Ashish Agarwal, Chief Risk Officer, YES Bank.

“Hire the best talent, take the triple AAA guy and put him in Risk. Risk today is no longer a backend job; 25 years ago you could be a loner crunching numbers, today we need an all rounder,” said Somak Ghosh, Managing Partner, Contrarian Fund; Founding Member Team, Yes Bank.

Similiarly, the Market Risk Panel consisted of Jayna Ghandhi, Head of Treasury, NSE, Navneet Munot, Chief Investment Officer, SBI Fund Management, Satrajit Bhattacharya, Joint General Manager, Treasury, HDFC Ltd, Vaidhyanathan Krishnaswamy, Faculty, ISB & University Connecticut and Vikram Bhorawat, Director and Head, Market Risk Management, Deutsche Bank.

"When we are a source of market risk, we are responsible for mitigating that and have to take that into consideration during our asset allocation," said Jayana Gandhi, Head of Treasury, NSE.

“I believe that over a time markets have evolved, these people have replaced the two way traders, and in the end I do not think its too bad,” said Navneet Munot, Chief Investment Officer, SBI Fund Management.

"All assumptions underlying our many models are failing today. This is not a pure quant job anymore," said Vikram Bhorawat, Director and Head, Market Risk Management, Deutsche Bank.

The key takeaways of the discussion was the impact of globalization on Market Risk as well as the use and limitations of Analytics and Modelling. It also spent some time on Algo trading in India.

The Operational Risk Panel consisted of Murali Subrahmanyam, MD & Head-India Operations, MSCI, Pratik Shah (Moderator), Partner, E&Y, Rajesh Jogi, Chief Risk Officer, RBS, Sachin Singh, MD - Risk, BNY Mellon India and Thakur Bibhuti Verma, Director, Deutsche Bank. The key takeaways of the discussion was focus on emerging risks and themes within operational risk and whether it is really given the right priority. There was also some discussion on the importance of Risk Culture as well as how to calculate Return on investing in Risk management.

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