Risk management may not be the most exciting aspect of business, but it can be the difference between success and catastrophic failure
Mohan Ramaswamy has an overall experience of 25 years, working with leading MNCs. Prior to setting up Rubix, Mohan headed the LexisNexis business for India and South Asia, transforming the company into one of the most respected brands in the Indian Legal Information world. He drove organic and inorganic growth at LexisNexis and executed several prestigious projects, including with the Prime Minister’s Office (PMO).
How are the future of young entrepreneurs and their responsibilities changing in a dynamic startup business environment?
From navigating emerging technologies to addressing social and environmental issues, the future of young entrepreneurs is bright, yet unpredictable in today’s VUCA world. However, with the right mindset and approach, they can seize the opportunities presented by this dynamic start-up environment and make a positive impact on society.
Sustainability and ethics are now key consumer prerequisites, giving entrepreneurs who prioritise them a competitive edge. This means going beyond profits to embrace waste reduction, social issues like inequality, and environmental damage. Those who understand that doing good is good for business are in an exciting position.
Innovation is the key to young entrepreneurs' success. Artificial Intelligence (AI) is shaking up traditional business models, giving innovators a competitive edge. With agility and adaptability, entrepreneurs who seek out opportunities to innovate and disrupt traditional industries will thrive.
The future belongs to young entrepreneurs who prioritise collaboration, diversity, and inclusion. Strong teams built on a foundation of openness and partnership are essential for creating groundbreaking products and services. Diverse perspectives and experiences are key to true innovation. Inclusive workplaces that welcome all identities and backgrounds unlock the full potential of teams. By embracing these values, young entrepreneurs can make a positive impact on society and create successful businesses.
Success in this dynamic startup environment requires adaptability, risk-taking, and a commitment to continuous learning and growth. The future of young entrepreneurs is full of exciting possibilities, and with the right mindset and approach, they can shape the future of business for years to come.
What lessons can start-ups learn from the current banking crisis?
The recent collapse of banks in the US has been a harsh wake-up call for the startup world. While these institutions may seem worlds away from the fast-paced, innovative world of startups, there are valuable lessons that young companies can take away from these events.
● The importance of risk management: Banks like Credit Suisse had taken huge hits due to unmanaged risks in their investment portfolios. So, startups need to be vigilant about managing their own risks, whether they're financial, operational, or reputational. This means conducting thorough due diligence, monitoring potential risks regularly, and having a plan in place to mitigate them.
● The need for transparency and accountability: The collapse of these banks highlights the danger of an opaque culture, where decisions are made behind closed doors, and there is little accountability for actions. Startups should be transparent about their business practices and financial health, both internally and with external stakeholders, such as investors and customers. This can help build trust and credibility, which are essential for long-term success.
● The value of innovation: There is a razor-sharp focus on innovation within the financial services industry, whether that means exploring new technologies, developing new products or creating novel business models. By staying ahead of the technology curve, startups can position themselves for success in a rapidly changing marketplace.
● The importance of agility: The banking crisis and the current funding winter have demonstrated the need for businesses to be agile and adaptable in the face of change. Start-ups should be prepared to pivot quickly if market conditions or other factors require them to do so. This may involve adjusting their business models to ensure that the business survives in difficult times.
● The need for a strong corporate culture: The current banking crisis has highlighted the importance of a strong corporate culture in promoting ethical behaviour and responsible business practices. Startups should prioritise building a culture that values integrity, transparency, and social responsibility. By doing so, they can attract top talent, foster a positive work environment, and build a business that is both profitable and socially conscious.
"Businesses need to foster a culture of risk management across all levels of the organisation. This means making risk management a priority, encouraging employees to report potential risks, and providing training and resources to help employees understand their role in mitigating risks."
How can Comprehensive Risk Management help macro and micro businesses prepare for unanticipated future crises and frauds?
A Comprehensive Risk Management strategy starts with identifying potential risks, including those that may be unanticipated. By conducting a thorough risk assessment, businesses can gain a better understanding of the risks they face and prioritise efforts to mitigate those risks. Risk Management Plans can help businesses take preemptive measures to mitigate potential risks. This may include implementing internal controls, training employees on best practices, and incorporating security measures into operations.
Sometimes, even with preventative measures in place, there may be unanticipated crises or frauds that occur. If there is a Risk Management plan in place, businesses would have contingency plans to address these situations, including plans for business continuity, crisis management, and fraud response. This is especially crucial because the risk landscape is constantly evolving, and businesses need to be agile and adaptable to stay ahead of potential risks. Risk Management requires regular review and updates to ensure that businesses are prepared for new and emerging risks.
Businesses need to foster a culture of risk management across all levels of the organisation. This means making risk management a priority, encouraging employees to report potential risks, and providing training and resources to help employees understand their role in mitigating risks. Therefore, by taking a proactive approach to risk management, businesses can protect themselves and their stakeholders and position themselves for long-term success.
What are the challenges in due diligence and risk monitoring?
Due diligence and risk monitoring are critical components of risk management, and while they are essential to managing risk effectively, they are not without their challenges. One of the primary challenges in due diligence is the sheer volume of data that needs to be reviewed and analysed. With the amount of information available today, it can be challenging to identify and prioritise the most critical risks. Additionally, due diligence can be time-consuming and costly and requires a high level of expertise to conduct effectively. On the other hand, risk monitoring can also be challenging, as it requires ongoing analysis and evaluation of risks and can be impacted by rapidly changing market conditions. The challenge here is to strike a balance between staying vigilant and agile without being overly reactive to short-term market changes.
Overcoming these challenges requires a strategic and proactive approach to risk management, including investment in technology and resources, ongoing education and training for staff, and a commitment to staying up to date with regulatory changes and emerging risks. It would be prudent to invest in third-party risk assessment, scoring, and continuous monitoring solutions to keep on top of counterparty risk. These platforms use a variety of data sources and analytics tools to provide a comprehensive view of a third party's risk profile. By leveraging these platforms, organisations can quickly assess the risks associated with counterparties such as suppliers, vendors, customers, franchisees, and partners. This can help organisations prioritise their due diligence efforts and allocate resources more effectively. Additionally, these platforms can help monitor ongoing risks by providing real-time alerts and insights into changing risk profiles. Ultimately, these tools can help stay ahead of emerging risks and mitigate potential threats before they materialise.
How do tools like KYC checks and Legal Entity Identifier help B2B marketplaces in eliminating risks?
In the B2B marketplace, the fraud risks associated with conducting business with unknown or unreliable parties can be significant. That's where tools like KYC checks and Legal Entity Identifiers (LEIs) can play a crucial role in mitigating these risks. KYC checks are a standard practice in the financial industry and are used to verify the identity of customers and other counterparties. B2B marketplaces may use KYC checks to confirm the identity of businesses using the platform, as well as the individuals associated with those businesses. This helps to reduce the risk of fraudulent activity and money laundering, as well as protect the reputation of the marketplace.
LEIs are unique 20-digit alphanumeric identifiers assigned to businesses by the Global Legal Entity Identifier Foundation (GLEIF), which oversees the use and implementation of LEIs across the world. They are designed to provide a standardised way to identify legal entities, including corporations, PSUs, proprietorships, partnerships, trusts, NGOs etc. B2B marketplaces may require businesses to have an LEI in order to use the platform. This helps to ensure that businesses are legitimate and reduces the risk of fraud or other illicit activities.
By verifying the identity of businesses and their associated individuals and ensuring that businesses have a recognised Legal Entity Identifier, B2B marketplaces can reduce the risk of financial and reputational harm.
What are the financial risk management trends to look out for in 2023?
In the current volatile, uncertain, complex, and ambiguous (VUCA) world, risk management tools must keep pace with the constantly changing environment. Only technology-enabled platforms are capable of achieving this feat.
As the world shifts towards digitisation, the Know Your Customer (KYC) process will undergo a transformation, with a greater emphasis on digitisation. Video KYC will become the new norm in the Banking, Financial Services, and Insurance (BFSI) sector as well as in B2B marketplaces. In addition, tools such as the Legal Entity Identifier (LEI) will become increasingly prevalent.
In the realm of credit decisioning, algorithmic credit scoring models will take centre stage. These models will automatically calculate Risk Scores and decide credit limits without the need for human intervention. As credit risk requires continuous monitoring, early warning systems will be deployed to collate near real-time risk indicators and provide updated risk scores. By identifying customers with deteriorating risk profiles, businesses can reduce their credit exposure.
To improve the speed and accuracy of credit decisioning, corporates will adopt technology-based credit workflow systems. These systems facilitate better record-keeping, prevent fraud, and help fix responsibility for incorrect credit decisions.
In 2023, we can expect to see rapid adoption of tech-based credit risk management platforms. These platforms will leverage big data, predictive analytics, artificial intelligence, machine learning, and visualisation tools to provide timely risk decisions in an intuitive manner. They will be capable of detecting and quantifying incipient risks and helping to avoid or mitigate them.
Apart from the role of technology, Environmental, Social, and Governance (ESG) issues are becoming increasingly important to investors and stakeholders. Financial risk management will need to adapt to this trend by integrating sustainability considerations into risk management processes, such as assessing the environmental and social impacts of investments and business activities.
Businesses and risk management professionals who stay up-to-date on these trends will be better equipped to identify and manage risks effectively in the years to come.
Why is it important to include risk management in your upcoming financial year budget
Risk management is an essential part of any business strategy, and including it in your upcoming financial year budget is critical for several reasons.
● By including risk management in your budget, you can allocate resources to identify potential risks that could negatively impact your business. This may involve conducting risk assessments, reviewing internal controls, and analysing external factors that could affect your business.
● Once potential risks have been identified, you can use your budget to allocate resources to manage and mitigate those risks. This may include investing in new technology or hiring additional staff to help manage risks more effectively.
● Despite your best efforts, unexpected events can still occur that can negatively impact your business. By including risk management in your budget, you can be better prepared to respond to these events and minimise their impact on your business.
● In today's hyper-connected world, a single risk event can quickly spiral out of control and damage your reputation. By including risk management in your budget, you can take steps to mitigate the risk of reputational harm by proactively addressing potential risks.
Risk management may not be the most exciting aspect of business, but it can be the difference between success and catastrophic failure. By proactively identifying and mitigating potential hazards, you can future-proof your business and pave the way for sustained prosperity in the future.
How are the future of young entrepreneurs and their responsibilities changing in a dynamic startup business environment?
From navigating emerging technologies to addressing social and environmental issues, the future of young entrepreneurs is bright, yet unpredictable in today’s VUCA world. However, with the right mindset and approach, they can seize the opportunities presented by this dynamic start-up environment and make a positive impact on society.
Sustainability and ethics are now key consumer prerequisites, giving entrepreneurs who prioritise them a competitive edge. This means going beyond profits to embrace waste reduction, social issues like inequality, and environmental damage. Those who understand that doing good is good for business are in an exciting position.
Innovation is the key to young entrepreneurs' success. Artificial Intelligence (AI) is shaking up traditional business models, giving innovators a competitive edge. With agility and adaptability, entrepreneurs who seek out opportunities to innovate and disrupt traditional industries will thrive.
The future belongs to young entrepreneurs who prioritise collaboration, diversity, and inclusion. Strong teams built on a foundation of openness and partnership are essential for creating groundbreaking products and services. Diverse perspectives and experiences are key to true innovation. Inclusive workplaces that welcome all identities and backgrounds unlock the full potential of teams. By embracing these values, young entrepreneurs can make a positive impact on society and create successful businesses.
Innovation is the key to young entrepreneurs' success. Artificial Intelligence (AI) is shaking up traditional business models, giving innovators a competitive edge.
Success in this dynamic startup environment requires adaptability, risk-taking, and a commitment to continuous learning and growth. The future of young entrepreneurs is full of exciting possibilities, and with the right mindset and approach, they can shape the future of business for years to come.
What lessons can start-ups learn from the current banking crisis?
The recent collapse of banks in the US has been a harsh wake-up call for the startup world. While these institutions may seem worlds away from the fast-paced, innovative world of startups, there are valuable lessons that young companies can take away from these events.
● The importance of risk management: Banks like Credit Suisse had taken huge hits due to unmanaged risks in their investment portfolios. So, startups need to be vigilant about managing their own risks, whether they're financial, operational, or reputational. This means conducting thorough due diligence, monitoring potential risks regularly, and having a plan in place to mitigate them.
● The need for transparency and accountability: The collapse of these banks highlights the danger of an opaque culture, where decisions are made behind closed doors, and there is little accountability for actions. Startups should be transparent about their business practices and financial health, both internally and with external stakeholders, such as investors and customers. This can help build trust and credibility, which are essential for long-term success.
● The value of innovation: There is a razor-sharp focus on innovation within the financial services industry, whether that means exploring new technologies, developing new products or creating novel business models. By staying ahead of the technology curve, startups can position themselves for success in a rapidly changing marketplace.
● The importance of agility: The banking crisis and the current funding winter have demonstrated the need for businesses to be agile and adaptable in the face of change. Start-ups should be prepared to pivot quickly if market conditions or other factors require them to do so. This may involve adjusting their business models to ensure that the business survives in difficult times.
● The need for a strong corporate culture: The current banking crisis has highlighted the importance of a strong corporate culture in promoting ethical behaviour and responsible business practices. Startups should prioritise building a culture that values integrity, transparency, and social responsibility. By doing so, they can attract top talent, foster a positive work environment, and build a business that is both profitable and socially conscious.
"Businesses need to foster a culture of risk management across all levels of the organisation. This means making risk management a priority, encouraging employees to report potential risks, and providing training and resources to help employees understand their role in mitigating risks."
How can Comprehensive Risk Management help macro and micro businesses prepare for unanticipated future crises and frauds?
A Comprehensive Risk Management strategy starts with identifying potential risks, including those that may be unanticipated. By conducting a thorough risk assessment, businesses can gain a better understanding of the risks they face and prioritise efforts to mitigate those risks. Risk Management Plans can help businesses take preemptive measures to mitigate potential risks. This may include implementing internal controls, training employees on best practices, and incorporating security measures into operations.
Sometimes, even with preventative measures in place, there may be unanticipated crises or frauds that occur. If there is a Risk Management plan in place, businesses would have contingency plans to address these situations, including plans for business continuity, crisis management, and fraud response. This is especially crucial because the risk landscape is constantly evolving, and businesses need to be agile and adaptable to stay ahead of potential risks. Risk Management requires regular review and updates to ensure that businesses are prepared for new and emerging risks.
Businesses need to foster a culture of risk management across all levels of the organisation. This means making risk management a priority, encouraging employees to report potential risks, and providing training and resources to help employees understand their role in mitigating risks. Therefore, by taking a proactive approach to risk management, businesses can protect themselves and their stakeholders and position themselves for long-term success.
What are the challenges in due diligence and risk monitoring?
Due diligence and risk monitoring are critical components of risk management, and while they are essential to managing risk effectively, they are not without their challenges. One of the primary challenges in due diligence is the sheer volume of data that needs to be reviewed and analysed. With the amount of information available today, it can be challenging to identify and prioritise the most critical risks. Additionally, due diligence can be time-consuming and costly and requires a high level of expertise to conduct effectively. On the other hand, risk monitoring can also be challenging, as it requires ongoing analysis and evaluation of risks and can be impacted by rapidly changing market conditions. The challenge here is to strike a balance between staying vigilant and agile without being overly reactive to short-term market changes.
Overcoming these challenges requires a strategic and proactive approach to risk management, including investment in technology and resources, ongoing education and training for staff, and a commitment to staying up to date with regulatory changes and emerging risks. It would be prudent to invest in third-party risk assessment, scoring, and continuous monitoring solutions to keep on top of counterparty risk. These platforms use a variety of data sources and analytics tools to provide a comprehensive view of a third party's risk profile. By leveraging these platforms, organisations can quickly assess the risks associated with counterparties such as suppliers, vendors, customers, franchisees, and partners. This can help organisations prioritise their due diligence efforts and allocate resources more effectively. Additionally, these platforms can help monitor ongoing risks by providing real-time alerts and insights into changing risk profiles. Ultimately, these tools can help stay ahead of emerging risks and mitigate potential threats before they materialise.
How do tools like KYC checks and Legal Entity Identifier help B2B marketplaces in eliminating risks?
In the B2B marketplace, the fraud risks associated with conducting business with unknown or unreliable parties can be significant. That's where tools like KYC checks and Legal Entity Identifiers (LEIs) can play a crucial role in mitigating these risks. KYC checks are a standard practice in the financial industry and are used to verify the identity of customers and other counterparties. B2B marketplaces may use KYC checks to confirm the identity of businesses using the platform, as well as the individuals associated with those businesses. This helps to reduce the risk of fraudulent activity and money laundering, as well as protect the reputation of the marketplace.
LEIs are unique 20-digit alphanumeric identifiers assigned to businesses by the Global Legal Entity Identifier Foundation (GLEIF), which oversees the use and implementation of LEIs across the world. They are designed to provide a standardised way to identify legal entities, including corporations, PSUs, proprietorships, partnerships, trusts, NGOs etc. B2B marketplaces may require businesses to have an LEI in order to use the platform. This helps to ensure that businesses are legitimate and reduces the risk of fraud or other illicit activities.
By verifying the identity of businesses and their associated individuals and ensuring that businesses have a recognised Legal Entity Identifier, B2B marketplaces can reduce the risk of financial and reputational harm.
What are the financial risk management trends to look out for in 2023?
In the current volatile, uncertain, complex, and ambiguous (VUCA) world, risk management tools must keep pace with the constantly changing environment. Only technology-enabled platforms are capable of achieving this feat.
As the world shifts towards digitisation, the Know Your Customer (KYC) process will undergo a transformation, with a greater emphasis on digitisation. Video KYC will become the new norm in the Banking, Financial Services, and Insurance (BFSI) sector as well as in B2B marketplaces. In addition, tools such as the Legal Entity Identifier (LEI) will become increasingly prevalent.
In the realm of credit decisioning, algorithmic credit scoring models will take centre stage. These models will automatically calculate Risk Scores and decide credit limits without the need for human intervention. As credit risk requires continuous monitoring, early warning systems will be deployed to collate near real-time risk indicators and provide updated risk scores. By identifying customers with deteriorating risk profiles, businesses can reduce their credit exposure.
To improve the speed and accuracy of credit decisioning, corporates will adopt technology-based credit workflow systems. These systems facilitate better record-keeping, prevent fraud, and help fix responsibility for incorrect credit decisions.
In 2023, we can expect to see rapid adoption of tech-based credit risk management platforms. These platforms will leverage big data, predictive analytics, artificial intelligence, machine learning, and visualisation tools to provide timely risk decisions in an intuitive manner. They will be capable of detecting and quantifying incipient risks and helping to avoid or mitigate them.
Apart from the role of technology, Environmental, Social, and Governance (ESG) issues are becoming increasingly important to investors and stakeholders. Financial risk management will need to adapt to this trend by integrating sustainability considerations into risk management processes, such as assessing the environmental and social impacts of investments and business activities.
Businesses and risk management professionals who stay up-to-date on these trends will be better equipped to identify and manage risks effectively in the years to come.
Why is it important to include risk management in your upcoming financial year budget
Risk management is an essential part of any business strategy, and including it in your upcoming financial year budget is critical for several reasons.
● By including risk management in your budget, you can allocate resources to identify potential risks that could negatively impact your business. This may involve conducting risk assessments, reviewing internal controls, and analysing external factors that could affect your business.
● Once potential risks have been identified, you can use your budget to allocate resources to manage and mitigate those risks. This may include investing in new technology or hiring additional staff to help manage risks more effectively.
● Despite your best efforts, unexpected events can still occur that can negatively impact your business. By including risk management in your budget, you can be better prepared to respond to these events and minimise their impact on your business.
● In today's hyper-connected world, a single risk event can quickly spiral out of control and damage your reputation. By including risk management in your budget, you can take steps to mitigate the risk of reputational harm by proactively addressing potential risks.
Risk management may not be the most exciting aspect of business, but it can be the difference between success and catastrophic failure. By proactively identifying and mitigating potential hazards, you can future-proof your business and pave the way for sustained prosperity in the future.
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