The comprehensive report titled "India Risk Report 2024" provides a deep dive into the evolving landscape of risk culture within India Inc., offering valuable insights into how organizations can build resilience in an increasingly complex risk environment.
Mumbai, September 27, 2024: As India progresses toward becoming a developed
nation under the Viksit Bharat 2047 program, it maintains rapid economic growth. This
progress, amid a complex risk environment, presents both opportunities and challenges
for Indian industries. A strong risk culture will enable an organisation to confidently
pursue its objectives by taking calculated risks and effectively managing potential
threats and hazards.
India Risk Report 2024 by ICICI Lombard and IRM India highlights the crucial need for
embedding a risk culture into organizational strategies. The report emphasises a simple
A-B-C approach for understanding the “Risk Culture” of an organization. Attitudes of
individuals and groups shape their Behaviours. Over time, these repeated behaviours
form the Culture, which in turn influences the attitudes and behaviours within the
organisation.
This report is a timely reminder of the importance of proactive risk management. It
assesses the self-evaluation of processes and cultural standing within Indian
enterprises, based on a comprehensive survey of risk perceptions, management
practices, and cultural aspects. It equips businesses with actionable insights to navigate
the complex risk landscape and unlock opportunities for sustainable growth.
The comprehensive study, combining primary and secondary research, incorporates
valuable insights from business and risk leaders across various fields. This report aims
to enhance our collective understanding and management of risks while promoting a
resilient organizational culture grounded in effective risk practices. It examines risk
disclosures from over 500 Indian companies and more than 50 global companies,
based on their annual reports for years 2022 and 2023. The quantity and quality of
these disclosures provide insights into the prevailing risk culture within these
organizations.
Key Findings:
1. Risk Maturity: Mature organizations ensure that all employees can identify risks
within their areas of responsibility. According to survey responses, there has
been a marked improvement in this aspect compared to the previous year. Still
42% of organizations still expect the Board or the Risk department to identify
risks.
2. Risk Culture: Measuring risk culture presents unique challenges due to its
intangible and subjective nature. Despite this complexity, our research team has
developed a risk culture scoring system (0–100) to benchmark organizational
resilience. Our findings indicate that only 16% of businesses score above 60,
with a mere 6% achieving scores between 80-100.
3. Top Risks: Cybersecurity, technology, and talent shortages have emerged as
pressing concerns across all sectors. As businesses increase their reliance on
digital platforms, the risk of cyberattacks has grown significantly, while the
challenge of hiring and retaining skilled talent continues to escalate
4. Mid-size companies: This year's report also emphasizes the importance of risk
in mid-sized enterprises, which form the foundation of the Indian economy and
account for nearly one-third of India's GDP and half of our total exports. Overall,
mid-sized companies have shown significant evolution over the past few years.
5. Expert analysis from 10 industry leaders and 5 risk experts: Our expert
contributors and key external stakeholders, who have accumulated years of
experience navigating complex risk landscapes across diverse fields, provide
these strategies, offering a comprehensive perspective on achieving sustainable
growth and managing complex risk landscapes.
Sandeep Goradia, Chief - Corporate Solutions Business at ICICI Lombard, states
"Risk perception across industries is evolving at an unprecedented pace. Sectors that
were once considered risk-averse are now confronting new and complex challenges,
driven by the increasingly dynamic and interconnected nature of the global risk
landscape. The rise of cybersecurity threats, coupled with talent shortages and
economic uncertainties, has transformed risk management from a strategic
consideration to an operational imperative. In today’s environment, organizations must
adopt a forward-thinking approach to anticipate and navigate these emerging threats.
Insurance plays a pivotal role in this framework, offering both financial protection and a
strategic buffer against unforeseen disruptions. Our collaboration with IRM enables us
to deliver in-depth insights and actionable strategies that not only address immediate
risks but also foster long-term resilience. By integrating risk management into the core
of their operations, businesses can not only safeguard their future but also capitalize on
opportunities that arise even in volatile conditions."
Hersh Shah, CEO, IRM India Affiliate and India’s Youngest Enterprise Risk Expert,
said “As India charts its course towards becoming a developed nation under the Viksit
Bharat 2047 initiative, it finds itself at the intersection of immense opportunities and
intricate challenges. The dynamic landscape of business and risk demands a new level
of agility and foresight. It is within this context that we present the second edition of our
report, "Building Resilience: A Comprehensive Analysis of Risk Culture in India’s
Corporate Sector,” with ICICI Lombard. The second edition delves deeper into the
essence of risk culture, a crucial yet often overlooked facet of organisational health. Our
commitment to understanding and enhancing risk culture stems from its profound
impact on an organisation's ability to prepare for evolving scenarios, navigate
uncertainties, and leverage opportunities effectively.”
Key Takeaways:
Top Risks in Focus: Cybersecurity threats and talent shortages are becoming
key concerns across sectors. As businesses increasingly rely on digital
platforms, cyberattacks have escalated, presenting a critical risk. Furthermore,
many organizations are finding it difficult to source and retain skilled talent, a
trend likely to intensify as the labor market becomes more competitive.
Changing Perception of Risk: The report reveals a shift in how some sectors
perceive risk. BFSI and Services were low-risk last year and are seen as riskier
as they face complex challenges like macroeconomic pressures and
cybersecurity, whereas Energy/Utilities and Pharma, which were high-risk last
year, are beginning to address risks related to digital transformation. However,
Manufacturing and Distribution is at the same lower level both years, so it’s a
constant.
Risk identification: As per the trends, we see that risk identification among all
employees rose by 6% from 26% in 2023 to 32% in 2024, which indicates
increased ownership and responsibility. Identifying "black swan" and "gray rhino"
events (that refer to unexpected and foreseeable catastrophes, respectively) is
now being looked at as a significant contributor to an organisation’s success.
Risk Management and Insurance: Furthermore, the report highlights that
businesses are increasingly turning to loss control solutions and insurance to
mitigate key risks. For cybersecurity, over 47% of respondents have adopted loss
control measures, while an equal percentage have chosen insurance to manage
their exposure. Technology risk is mitigated by 71% of organizations through loss
control efforts, while 66% manage legal and regulatory risks. Fire hazards remain
the most insured risk, with 70% of businesses covered. However, there is a
significant gap in managing climate change risk, as 37.5% of companies still lack
any form of risk solution, indicating an area where further insurance and risk
management efforts are required.
Strengthening Risk Culture: A key theme in the report is the importance of
fostering a strong risk culture within organizations. The survey shows that many
businesses are still struggling to instil a culture where risk management is part of
everyday decision-making. Companies across sectors must prioritize building a
risk-aware workforce to improve their overall resilience.
Risk Disclosures: The dedicated chapter on risk disclosure analyzed 521 listed
Indian companies reveals that only 3% of respondents maintained consistent risk
disclosure over two years, serving as a wake-up call for Indian organizations.
Effective risk disclosure requires a top-down approach, where the tone is set at
the top, and the board is held responsible for driving risk culture throughout the
organization.
While solid risk management processes and advanced technology are essential for risk
management, a strong risk culture is also critical. This culture must empower everyone
in the company to recognize, identify, and manage risks.
The self-assessment of risk culture, combined with the risk disclosure analysis,
highlights the urgent need to enhance risk culture within organizations. This research
will benefit industry risk leaders and all Indian enterprise stakeholders. It will help them
identify the key areas that require attention to become risk-intelligent and risk-ready,
enabling them to confidently pursue ambitious goals.
