New Delhi: As the PMC Bank debacle has fuelled a nationwide debate, the minuscule presence of qualified risk management professionals have raised concerns at India’s financial institutions like banks, non-banking finance companies, and co-operative banks.
The average number of risk management officials engaged in an Indian bank is estimated at less than one per cent of total payrolls against the global average of 3 per cent-plus.
The concerns come on the back of the financial turmoil at PMC Bank, followed by a few corporate defaults, which triggered a debate about the safety and soundness of the Indian financial system. Experts feel better risk management has become a pressing priority now.
“Percentage of employees in the risk and compliance function in independent decision making in any Indian bank is typically less than one per cent; globally this is upwards of 3 per cent,” says Nirakar Pradhan, Director & Asia Pacific Representative, Professional Risk Managers’ International Association (PRMIA).
“In a competitive world where businesses are rewarded for high growth, the risk management often takes the back seat. Therefore, discussion on risk management comes to the fore at the time of a crisis, and practices in this regard should be top of the agenda for financial institutions,” he added.
In the financial world, risk management broadly refers to the policies, processes, tools and strategies to identify, assess, manage, control and reporting on the present and forward-looking risks.
“It has been observed that the board of directors is ultimately responsible for defining risk policies and strategies aligned to corporate business and goals,” said a top official of a public sector bank.
It may be noted that on August 30, 2019, the government has allowed the boards of public sector banks to appoint Chief Risk Officers and pay them market related salaries.
