The number of risk managers at Srei Infrastructure Finance has increased by 63 per cent in the last two years and stands at 13. With three lines of defence towards risk management, the company is pulling all stops to ensure the company is guarded from all kinds of risk. Since risk professionals play a key role, they have been put on an equal stature as business developers.
Saud Siddique, joint managing director, Srei Infrastructure Finance said, “At the credit and investment committee meetings of Srei, risk managers and other senior management from treasury, finance, internal audit, assess and voice their opinion on loan and investment proposals being put forward by front-line business developers. This has imbibed a culture in which risk professionals and support function management are perceived to be on an equal footing with business developers.”
Srei is not the only company to do this. Other corporates, including major players in the banking and financial services sector, telecom and lately real estate firms are looking into investing seriously on risk managers, increasing the demand for such professionals by at least 30-40 per cent.
Mritunjay Kapur, country managing director, Protiviti Consulting, explained that the downturn coupled with emergence of corporate scams has brought internal audit back into focus. “Companies are now looking at specialists to dig deeper into all the facts. Talent across skill-sets have being recruited as risk managers. Earlier, it used to be people only with a Chartered Accountant degree who came into this field. But lately, people from other professions have also started getting in. They are looking for people who can identify key risk areas and understand the processes well, for which a CA degree is not mandatory,” said Kapur.
Recently, companies like Reebok and OnMobile Global have been under investigation by government authorities for alleged financial misconduct. Mobile value-added services firm OnMobile Global admitted there was some weakness in its processes. Similarly, global sportswear major Adidas also recently admitted there were some ‘commercial irregularities’ at the Indian unit of Reebok. British bank Barclays Plc is also embroiled in an interest rate rigging scandal.
Risk managers are those who perform risk assessments tests in a company. Industry experts said they could either be a generalist with a CA degree or a specialist, who could be a sales and marketing graduate, MBA graduate or even an R&D professional. Though companies have risk managers for overall risk assessment, some firms may have such managers for specific areas such as supply chain.
Kapur informed their duties are exhaustive. It ranges from presenting the internal audit report to the board of directors to having a say in the functions of the organisation.
“Since it is a strenuous function, it is also well paying.
A manager, about 27-28 years of age, could earn about Rs 25 lakh per annum. One in the age roup of 30-32 years could earn even Rs 40 lakh per annum,” he added.
Companies like Srei have a hierarchical risk management structure. At Srei, the objective is to have business developers imbued with a strong sense of risk awareness and commitment to robust due diligence. Risk managers are involved right from the planning and strategy stage to the final closure of the transaction, ensuring that risk remains well within the manageable level. Risk managers are involved at all stages of life cycle of the loan-market mapping, sourcing of transaction, analysing the credit proposals, advising on suitable risk mitigants, and assigning risk ratings to transactions.
“While the risk managers are involved in limit setting and limit monitoring, their roles go beyond the traditional role of ‘limit cop’ through constant engagement with business developers to develop a deep understanding of a rapidly evolving market environment and increasingly complex risks which acts to help the risk management function being seen as an enabler to business developers rather than an obstacle to be circumvented,” said Siddique.
Large companies have three to four people as risk managers. People in the core operations area are the most desired. A telecom company, for example, would look for a telecom engineer as a risk manager to understand the areas of revenue and billing. Kapur pointed that though 75:25 was the traditional ratio of risk managers (75 per cent CAs and 25 per cent specialists), companies are moving to a 50:50 ratio. “Financial services, telecom has a lot of traction in terms of risk managers, though the profession is relevant across all sectors. Lately, real estate companies are also investing heavily in risk managers,” he said.
The scope of risk managers has also increased, said Kapur. Though finance and accounting used to be the priority earlier, now risk managers are also looking at areas like operations, supply chain and procurement. V Kumaraswamy, chief financial officer, JK Paper, said there was at least one such person in each group company in the JK Group. For areas such as foreign exchange, where the risk levels are high, the company has specialists in the field looking at overall operations closely to mitigate risks. Further, there is a vice-president at the group level looking at the risk assessment aspect.
Auditing companies have also seen this sharp change of focus. Deepankar Sanwalka, head-risk consulting, KPMG India, informed that in the last two years, risk managers in KPMG’s Risk Consulting practice have grown to more than 1,500, of which more than 50 are partners and directors. He said the growth has been primarily on account of increasing awareness among corporate India on the benefits of proactively managing risks leading to an increasing demand for risk-related services.
“Risk management has become a high priority agenda for CEOs and acquired a ‘corporate imperative’ status. This is evident from the fact that even non-financial companies have begun to embrace the concept of appointing Chief Risk Officers (CROs). CROs are expected to rigorously question the assumptions underlying the business strategy and validate the same using benchmarking data, competitive data and sector analysis. Our risk managers help CROs (or people in equivalent positions) to develop, deploy and maintain a practical, holistic risk management approach that can help them through immediate, long-term, and evolving risks,” said Sanwalka.
Ashish Thapar, principal consultant-professional services, Terremark, a Verizon company, also added that BFSI sector firms and telecom firms have been taking a stringent approach towards risk management more lately due to tighter compliance norms required by their regulators.
“The customer requirements of these companies have also increased, giving a direct boost to demand for such risk managers by about 40 per cent,” he said.
According to 2011 data by the Institute of Internal Auditors, the Risk Consultancy market is approximately $30 billion (Rs 1.6 lakh crore) globally. In India, the data reflected that the volume of risk managers has taken a leap of almost three-fold over the last two years.