Even before the pandemic hit, the global economy was rapidly evolving, with technological innovation and changing geopolitical realities driving the transformation. Covid-19 has accelerated the need for Indian businesses to develop a conscious approach to Enterprise Risk Management (ERM), given that it is vital, not only for dealing with emerging uncertainties, but also for proper allocation of resources, and organisational growth.
As we gradually move towards post-pandemic normalcy and work towards revitalising our economy, we will need greater risk intelligence among professionals across industries, to make India, its economy and corporations resilient enough to face future crises.
To reach this goal, it is important that we facilitate ERM education from a very early stage, preferably through higher education curriculum. This will also be in line with the aim of developing multidisciplinary abilities among students, as outlined in the National Education Policy 2020.
Resilience-based education
When it comes to higher and technical education, the emphasis has traditionally been on management and leadership training.
This has often led to skewed understanding, where a lot of stress is laid on pursuing opportunities, without considering the risks associated with them.
As a result, even our business graduates lack a well-rounded enterprise risk perspective.
In streams such as sciences, humanities, engineering, or medicine, risk management is completely ignored.
Risk competency is rarely seen as important for non-managerial professions. However, this is a shortsighted view that is based on a limited understanding of risk management. In practice, every profession contains varying degrees of uncertainty. The ability to identify, assess, and mitigate these risks is vital in any profession.
Hence, it is time we shifted focus towards resilience-based education across different disciplines, as the future is laced with myriad uncertainties.
The recently released sixth assessment report from the United Nations Intergovernmental Panel on Climate Change (IPCC) has once again firmly put a lens on the reality of climate change and its manifold impact on the lives of nations and citizens across continents.
Nobody is being spared by the rapidly changing and increasingly fragile ecosystem .
In the 21st century, every profession and industry will have to work within the ever-changing environment. Hence risk, resilience and responsibility are vital focus areas that need to be nurtured during the formative years of students in the higher education system.
Leading through a crisis
The role of leadership has also undergone a steady transformation. The pandemic required business leaders to quickly adapt to new technologies, in the face of a highly volatile environment.
Even as normalcy has returned in some small measure, the challenge lies in ensuring that we can stay agile in a changing global situation.
Leaders, whether they head businesses or smaller teams within an organisation, must therefore have the skills to manage a crisis.
By integrating ERM education into the university curricula, we can help students develop risk competency from an early age.
Such holistic education ensures an in-depth knowledge of the principles and practices of ERM and lays the foundation of a risk-conscious approach in our future leaders.
In the last few years, we have seen an increasing demand for risk-intelligent professionals. This demand has shot up further during the pandemic as businesses realised the importance of a risk-aware organisational framework. The aim is to ensure that ERM is adopted as an integral part of organisational culture and decision-making, instead of being an intermittent and compliance based exercise.
Shifting focus
With emerging risks from cyber-attacks, geopolitics, climate disasters, terrorism, wars, and other corporate governance-related issues, we will see an increasing focus on enterprise risk compliance, and a corresponding rise in demand for risk-intelligent professionals. The inclusion of ERM in the higher education curriculum can also improve the employability of graduating students.
A tightening compliance structure, with strict enforcement from regulatory bodies, has also added to the increasing demand for risk-intelligent professionals. For instance, the Reserve Bank of India mandates the appointment of Chief Risk Officers (CROs) in non-banking finance companies beyond a certain asset size. For insurance companies, risk compliance comes under corporate governance guidelines, as specified by the Insurance Regulatory and Development Authority of India.
With the Securities and Exchange Board of India expected to announce a risk regulatory structure for the top 1,000 listed companies, these regulations may be extended beyond financial institutions. As more regulatory bodies mandate the appointment of risk committees and CROs, ERM qualifications/examinations will facilitate faster career advancement for professionals and more resilient organisations
Moving beyond finance
Traditionally, risk compliance has been confined to financial institutions such as banks, NBFCs, brokerage firms or insurance companies. Consequently, risk management qualifications were pursued only by students who aspired to work in the financial sector.
However, with compliance structures now extending to non-financial organisations, there is a push towards risk-embedded corporate governance in different sectors. To facilitate this growing demand, ERM examinations that provide a pathway to Certified Fellowship (CFIRM) — provided by the Institute of Risk Management — should be included in higher education curricula.
Under the NEP2020, students can opt for a second degree, in parallel with their primary course. This means that five-level ERM qualifications can also be pursued, along with almost any graduation or post graduation programme.
Students and working professionals can opt for higher-level qualifications as they gain experience and develop a deeper understanding of the subject.
A robust economy demands that our emerging workforce be capable of staying agile in the face of an uncertain business environment. This demands a risk-conscious approach that is deeply embedded within organisational structures. It has become imperative for future leaders to equip themselves with the knowledge of risks, as applicable to every aspect of business. We must ensure that future professionals and business leaders have the academic knowledge and the competence to make decisions using a risk-conscious framework. Towards this end, including ERM courses in the Indian higher education curriculum would be the first step. (Courtesy: Business Line)
