Prof. Madhu Vij and Subhashis Nath highlight the critical shift of risk management from tactical compliance to a strategic advantage for businesses. Their insights emphasize the Model Risk Code (MRC), a FICCI-Global Risk Management Institute initiative, as a practical guide championed by Boards. Key messages include embracing risk as an enabler, embedding it in KRAs, fostering a 'fail fast' culture, and strategic scenario planning for enhanced organizational resilience.
Prof Madhu Vij, Academic Council Chair and President at Global Risk Management Institute, Gurugram, Former Professor, Faculty of Management Studies, University of Delhi & Subhashis Nath, Dean and Mentor, Global Risk Management Institute, Gurugram, Former Senior Vice President and Global Leader, Genpact Enterprise Risk Consulting
The multiple economic and financial crisis along with a series of scandals across various sectors have made risk management processes an indispensable part of good corporate governance practices. The changing risk landscape in the last two decades, has made the process of risk management challenging for companies as the focus of risk management has elevated from the tactical to strategic level. High performing organizations need to manage their risks strategically in all areas of operation. Boards have a duty to ensure that risks are being effectively managed and that the internal and external audit function provides regular, objective and independent assessment and compliance of risks in their respective areas. This oversight is essential to create a strong risk landscape and have regular updates on emerging risks so that there is adequate professional expertise to develop best practices.
Realizing a pressing need and that all company Boards need assurance that risks are being managed effectively FICCI and Global Risk Management Institute collaborated and set up an 18-member Risk Task Force comprising Board members, Big 4 Chair/ CEOs, and global risk and academia leaders, to create a Model Risk Code (MRC) for the Indian industry. The Risk Task Force was chaired by Mr. M. Damodaran, Former Chairman, Securities and Exchange Board of India. The objective of the Risk Task Force was to empower the corporates to embrace risk management practices and also to create a climate for risk appreciation, awareness, and drive a risk culture. The MRC is designed as a practical playbook with best practices and guidelines around risk management and is applicable to all companies, Board members, Risk management and Audit committee members, CEO, CXO, CRO and all business heads. Some overarching key messages that the members focussed on and that should align with the industry, regulators and external agencies through the Model Risk Code are:
Thus, the Model Risk Code will help Boards and organizations have a strong risk culture, play a crucial in bringing out best practices around embedment of Risk Culture, KRA definitions around Risk Management, Risk identification, Risk scale, Risk measurement, Risk treatment, Risk governance structure, Risk reporting and monitoring, Risk resources and engagement with internal /external stakeholders. The focus of the code is to create a strong, healthy risk culture, prevent scandals and treat risk as an enabler for forward -thinking decisions.
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