Gurgaon based
Global Risk Management
Institute (GRMI) is pioneer to put together a cutting edge curriculum in Risk Management to educate aspiring professionals for a successful career in the Risk Management market, which is estimated to be upwards of USD 40 Billion and growing. It’s the first of its kind comprehensive risk management curriculum in the world, covering end-to-end fundamentals of risk management, across multiple industry verticals such as, manufacturing retail, banking, life sciences, telecom, hospitality, etc.
GRMI is committed to ensuring an environment where students get to interact with more global risk leaders and risk practitioners than what any other institute can offer.
In an interaction with Sujata Sangwan of BWDisrupt, Subhashis Nath, Mentor, Global Risk Management Institute (GRMI), discusses about the risk management and how it can help aspiring entrepreneurs make a successful start.
For those who don’t know, what is Risk Management and why is it needed?‘Risk Management’ de-mystified simply refers to a situation where all the key stakeholders in an organization operate in a coordinated manner to think through all that can go wrong in their business processes, have adequate mitigating controls in place to deal with such an eventuality, and identify the need for implementing changes, when required. Most, if not all, organizations, irrespective of their size, industry or geographical spread are impacted by uncertainties that can prevent them from achieving their stated business objectives of growth, profitability, market share, market valuation, employee satisfaction, etc.Hence it is critical for them to have processes in place to respond quickly and efficiently to the uncertainties that impact their operations and business objectives.. The ability to manage risks – synonymous with uncertainty -- will in the longer term differentiate successful organizations from the not-so-successful ones. These risks that impact a business are not always internal; they could also be external factors like regulatory risks, competition, customer behavior pattern changes, geo-political risks, and several others.
Why, according to you, has Risk Management assumed such significance over the years?There are multiple factors which, in my view, have dramatically increased the importance and appreciation for Risk Management in the corporate world. Let me call out a few:
The world today is a lot more global than it used to be, and companies across the world are turning from national corporate giants to global players, which requires them to be able to rely on the strength of processes beyond the competency and brilliance of a few in the leadership and operating teams.As operating models become more complex, there is limited appreciation of nuances around doing business in countries or regions that are new for the organization leadership. It necessitates the availability of far better information systems to senior stakeholders for the visibility of key operating metrics, which in itself is a significant challenge that many global companies struggle to keep up with as they grow their businesses exponentially.
There are a lot of disruptive business models in the market today, causing companies both to re-think their entire operating model and to figure out how to differentiate themselves. Uber, Oyo Rooms, Amazon, Snap deal are just a few that all of you would relate to, but in reality, similar disruptions are happening across the board in almost all segments.
Organizations that keep themselves agile in decision-making through effective Risk Management are likely to succeed, while many others will see themselves struggle in times to come.While the degree may depend on multiple factors, one certainly hears many leaders now say that they feel far less in control of their business than they did before – effectively what they are saying is, ‘I don’t know all the uncertainties that can hit me, so how do I plan long-term, and how do I change tracks, if required, quickly enough?’.
Do you think Risk Management is synonymous to Business Strategy?Risks impact all organizations at three levels essentially:
Strategic: new product innovation, competitor pricing, regulatory changes, new market entry, etc.
Operations: procurement price optimization, forecasting inaccuracy, inventory mismatch, distribution channel bottlenecks, etc.
Enabling Functions: talent acquisition and retention, financial reporting issues, compliance related challenges, etc.
Most of the above have a technology aspect that can add to the risk portfolio of the organization. Hence, while I would not say Risk Management is synonymous with Business Strategy, some of the most significant risks that impact an organization and typically keep the Board or the CXO suite (CEO, CFO, COO, CRO, and others) anxious do indeed need to be addressed as part of an organization’s business strategy.
From your experience, which sector does you thinks needs Risk Management the most?While this may be contrarian to an extent, in my view any sector in the current business environment that is exposed to drastic digital disruption needs maximum Risk Management. They are the ones that need to have an extremely agile decision-making process in place, and a team that can not only think about re-imagined business processes that their competitors could come up with, but also see if they can stay a step ahead of the disruption.
In a more traditional world, while the more evolved and mature Risk Management practices exist in the Financial Services space, from a relevance and need perspective it is equally required across all industry sectors, since Risk Management, the way I define it, is “Value Preservation”, and I cannot imagine the Board or the CEO of any successful or aspirational company saying they really do not care for value preservation. In fact it might be difficult to find any Board or CEO that does not say that value preservation is their singularly most important objective.
How can Risk Management help aspiring entrepreneurs make a successful start?Though I definitely don’t qualify to be called a serial entrepreneur yet, having set up 12 years back what has been extremely successful, mentoring one currently, and being invested in a third, I do have a point of view. If there is any organization that has to deal with maximum vagaries of uncertainty, it is a start-up. It really doesn’t matter which end of the spectrum the start-up belongs to – Model 1: mature existing business segment with well-defined operating models, or Model 2: completely innovative and disruptive new age business model -- both are as acutely impacted by the uncertainty quotient. While it may sound very basic, trying to answer the following question would tell any entrepreneur how uncertain the probability percentage of success is for all start-ups:
Model 1: If you are a new player in a mature business segment, why should the market accept you, and how will you deal with all the marketing and customer acquisition efforts of your competitors? OR
Model 2: If it is a disruptive model, how do you know the market will embrace it, and why can’t someone else with deeper pockets and greater market presence beat you at it very quickly?
One of the very essential elements of success for a start up or entrepreneur is to be able to map out the universe of risks that impact the business, and one needs to be extremely candid and dispassionate in the process.Most entrepreneurs believe they can overcome all challenges through their passion, energy or financial power, but unfortunately that is not enough unless one does this in a structured manner. Very few can be self-critical enough to be able to map out the universe of uncertainties.Is the Unique Selling Proposition truly unique? Is the entry barrier for competition indeed as difficult as one thinks it to be? Does the market really have a major need for the product/ service/ solution? How long can I sustain it? Do I have a plan B, C and D? If competition were to catch up with my innovation, am I prepared with my innovation 2, 3 4 and 5 to stay ahead of the curve? There are many such difficult questions that one needs to answer in order to map out the world of uncertainties of a start-up, and those who get the universe right and have the mitigation plans in place are distinctly more likely to succeed than others.
There is a common belief that if a start-up cannot make its mark within 18 months, it is a lost cause -- does this hold true in today's economy?Well, I guess the first assumption in that perception is that it is a new age innovative business model that has lower gestation time. Even today there are entrepreneurs building long-term business models around solar power, data monetization, education, healthcare, which will have significantly longer gestation period than 18 months. I would say a large part of where the 18-month presumption comes from is the extremely low patience point or, inversely put, the incredibly unreal ROI expectations that many of the new age entrepreneurs often demonstrate. Part of it also comes from the fact that many startups believe that real market need assessment is done when the business is in full cash burn mode. The reality is that there is a lot that needs to be done to assess whether a business model would succeed or not before one lets the clock start ticking to monitor the 18-month period. While it is prudent to do reality checks on the success of a start up at a fairly regular frequency, it would always vary by industry segment and business model, and hence there is unlikely to be a well-defined time frame when one can say it is time to pull the plug. I am not even getting to the point that often this 18-month presumption is defined by the angel and seed investors which, in my view, should not be considered a good yard-stick for a well thought-through entrepreneur’s business model.
What risk do you think the GST poses to the Start-ups?I would say it is reasonably limited. GST, I think, is a good business practice, which would create far better visibility and transparency to the indirect tax regime in the country. There could be some minor initial hiccups around system implementation and configuration issues, but that is a part of embracing any regulatory change. If anything, it should keep start-ups from being distracted from their core business focus and getting drawn into the myriaddisparate tax issues and interpretations that existed in the pre GST model. For those start-ups looking to engage with international organizations in the supply chain side or with buyers, it would be a far simpler regime and is likely to improve the ease of doing business in India substantially.
Could you share your views on how the Risk Management sector will shape in the next 5 years?From what I have been discussing with Board members, industry leaders and leaders from the risk consulting world, I am certain that in 5 years’ time a few significant changes will come about:
-- Boards and Business leaders will ask more risk-related and risk-based questions than they do today;
-- More business leaders / CEOs will have a stronger Risk Management understanding than what we see today;
-- The notion that Risk Management is more relevant for financial services will be completely wiped out, which would mean a dramatically higher quantum of need for risk-educated professionals, as it would permeate across all industry segments;
-- Agile risk-based decision-making companies will differentiate themselves as leaders in their areas of industry segments.
While it may be a hackneyed phrase that change is the only constant, it couldn’t be more apt than in the world of Risk Management. I am convinced that the world of Risk Management will transform itself in the years to come and industry leaders, consulting leaders and members of academia will need to come together to create a far enhanced eco-system for risk professionals.
