The Hindu Business Line : Thanks to SEBI's revised listing norms — Consulting firms flooded with risk management assignments

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Thanks to SEBI's revised listing norms — Consulting firms flooded with risk management assignments

Anil Sasi
Preeti Mehra

New Delhi , Feb. 18

THINKING of getting into a risky venture?

Come April 1 and company boards would have to grapple with the new risk management norms stipulated in the revised Clause 49 of SEBI's Listing Agreement, which requires firms to put in place a virtual check-point for identifying and mitigating business risks.

Consulting firms have seen a spurt in assignments, notably from companies in "high-risk" sectors such as pharmaceuticals, information technology, finance and automotive.

Risks could range from losing a contract to facing a product recall or product failure; emergence of new competitors to losing a shipment — for all these and for disaster recovery, companies require business contingency and continuity plans.

Risk management also includes putting in place a shadow CFO or CEO, ensuring a backup for every aspect of the supply chain and a succession plan for top-level management.

"Managing risks becomes even more pertinent in the case of companies that have ventured into the global markets. For instance, several of the Indian pharmaceutical companies have had serious setbacks in the past year due to non-acceptance of products in the global market and with tight controls such incidences could be lessened," a market watcher said.

"Putting in place risk management is a big opportunity and a space that consulting companies will increasingly occupy. However, the downside is that it is also a huge responsibility — your neck is on the line as well," Executive Director at KPMG's Risk Advisory Services, Mr Richard Rekhy, said.

Mr Amitabh Jhingan, Associate Partner, Grant Thornton, agrees that compliance has widened the scope of companies like theirs.

"What has changed is not the processes that companies have to follow, but they are now required to systematically furnish their methodology and to demonstrate compliance to a board and the stakeholders," he said.

Companies, on their part, have started to work on getting their act together.

For instance, several of the IT companies, which would have to put in place alternative lines of data transfer as part of their business continuity plan, are thinking in terms of sharing sites for such a contingency. Under the board disclosure norms on risk management stipulated in Clause 49 of SEBI's Listing Agreement, companies are required to lay down procedures to inform board members about the risk assessment and minimisation procedures.

According to the stipulations, the procedures require to be periodically reviewed to ensure that executive management controls risk through means of a properly defined framework.

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