Management Journal for Advanced Research

Introduction

To put it another way, a risk is a future event whose outcome is unknown at the time of its definition. Risks can bring both positive and negative outcomes to a business, and the magnitudes of these outcomes can range from small to enormous. One can find a list of 10 commonly used definitions in a treatise by Aven and Renn (2009). Since the 19th century, academic literature has discussed risk in the context of commerce, economics, and law. For nearly a century, people's and money's aversion to risk has been well documented. Fama's classic works on risk and financial returns helped to popularise the link between risk and financial returns in business research in the second half of the 20th century. On the front of decision-making, it was also recognised early on that successful businesses require an analytical evaluation of their dangers. Even in the 1960s, Greene (1969) advocated for finding the right mix of opportunity and stability.

In the last 25 years, our understanding of business risks has grown tremendously. A number of academics and consultants have advocated for business risk management, which includes alternatives like integrated risk management (Miller 1992), a holistic approach to enterprise-wide risks (Palmer 1999), using analytics to predict the future (Duckert 2010), and seeing risks as integral to [corporate] governance (Frigo 2011). It has become increasingly common for companies to use the Committee of Sponsoring Organizations' COSO/ERM framework for risk management. Many publications are available to today's business managers, supplying them with up-to-date information on the risks their companies face and the various ways they can manage those risks. BMI Research publishes an India Country Research Report every quarter; the Reserve Bank of India releases a Financial Stability Report every quarter, with a perceptual survey of systemic risks to the economy every six months; and the Federation of Indian Chambers of Commerce and Industries conducts an annual India Risk Survey in conjunction with a knowledge partner. Annual reports of publicly traded companies, particularly those filed under the Indian Companies Act of 2013, include analyses of the specific risks faced by the companies themselves, in addition to information about the broader economic risks. There has been an increase in the use of risk as measured by Ngram Viewer, a Google Books tool that calculates the probability of 'risk' being found within its collection.

In situations where the risk appetite is lower than the risk incidence, managers have the option of either accepting or transferring the risk. Traditional risk management or enterprise-wide risk management (ERM) can be used to accomplish both of these goals. ERM takes a portfolio view of all the risks that the organisation faces, as opposed to the siloed approach of traditional risk management. An ERM framework finalised in 2004 by the Committee of Sponsoring Organizations (COSO) views audit, legal, corporate governance, investor relations, Treasury, and finance as interdependent business functions. It provides a central repository for risk information, risk assessments, risk metrics, corporate development and strategic planning, risk reporting and a uniform approach to the organisation. In contrast to traditional risk management, ERM considers all risks, including hazard, financial, and strategic risks, in a coordinated manner.

Companies can take on more strategic business risk - and better take advantage of opportunities in their core business- by reducing non-core exposures, according to Nocco and Stulz (2006) in their concept paper. This means that the company can take strategic and business risks in its core areas because of the ability to find an economic hedge for non-core activities. By right sizing risks, you can reduce your need for additional funds in the event of a financial crisis, which means you'll need a greater amount of cash in reserve to deal with it. According to credit ratings, VaR or earnings volatility, the amount of buffer needed will vary depending on the target probability of default or financial distress. ERM gives businesses a leg up in the long run by allowing them to consistently measure and manage risk.

Duckert (2010), Utter (2006), Frigo (2011), KPMG (2001) and Nocco (2006) are examples of ERM implementation that are worth mentioning. Table 1 summarises these ERM implementation characteristics. On how these features are put into practise in Indian organisations, Gupta (2011) conducted research. Several studies have shown that ERM implementation is largely dependent on a number of organisational factors. Economic Risk Management (ERM) in insurance industry may be affected by factors such as financial leverage, firm size, and business complexity, according to McShane et al (2011). Standard and Poor's ERM rating is influenced by size of company, according to their findings. The level of organisational risk is studied by Palmer and Wiseman (1999) using variables such as size of organisation,

Many other factors, such as employee confidence and operating margins are also discussed in the literature. The methods used to manage risk differ from one organisation to the next, as well as from one industry to the next. The majority of previous research has focused on the differences between sectors. Industry practises refer to management methods used in a particular industry that are remarkably similar from one company to the next. Industry-wide adoption of best practises is the result of lateral movement of skilled people and management professionals. One industry sector's management practises may be vastly different from another's. Because of the wide range of differences between industries, we can learn more about the underlying causes of those differences.

The study's research question is whether or not the previously discussed enabling factors apply to India. The purpose of this study is to determine whether or not there is a difference in risk management practises, and to speculate on possible explanatory factors. As a result, the following hypotheses have been developed.

DATA CHARACTERISTICS AND PERCENTAGE ANALYSIS

Risk management is influenced by factors such as the size of an organisation, its industry sector, the presence of management systems, and its leverage. In the current perceptual study, practitioners from various industries and echelonsinvestigate what motivates ground level risk management practises. Individual managers are therefore the focus of this research. The seniority and role of an individual manager are not dependent on the characteristics of the organisation.

Hypothesis 1's independent variables can be observed tacitly. On the other hand, good management practises require input from senior executives who are familiar with the organization's management practises. According to Hypothesis 2, a questionnaire was designed to collect data on five maturity variables and all seven aspects of ERM. A total of 59 questions were included in the survey, with 14 of those questions focusing on the demographics of respondents and their organisations. Open-ended questions were used to gather data on the qualitative aspects of risks faced by an organisation. 24 closed-ended questions and 8 open-ended questions were used in the questionnaire to measure the hypothesised variables in this study. A binomial scale or Likert scale was used depending on the practise that was being studied.

An increase in the average risk score indicates that a particular risk is more important to the respondents. This is calculated by subtracting the risk rank from 12. Many experts agree that price fluctuations (in agriculture and manufacturing), technological advances (in the financial services sector, particularly in banking), as well as policy or regulation alterations (in utilities, financial services, and manufacturing) represent some of the greatest threats. According to the average risk score, 2-3 risks stand out strongly and the other risks are relatively less important in some sectors, such as agriculture or utilities; whereas it is difficult to identify the top risk from all possible risks in other sectors, such as oil and gas or banking and financial services.

Is there a variation in the way organisations manage risk when the dangers they face are different for each sector? Using 14 dichotomous questions and four open-ended questions, the presence of risk management practises was determined. To begin, we examine the sample's responses to questions about the use of risk management techniques. In terms of reporting, risk management policy, the appointment of a Chief Risk Officer (CRO), and risk identification, risk reporting is the most common practise. As evidenced by the low response rate, Indian industry has yet to adopt risk management practises such as delegation of risk-related authority, risk mitigation training, and risk budgeting.

As a result of these responses, we can conclude that the establishment of a risk reporting channel, the creation of an ERM policy, and the appointment of a CRO are among the first steps an enterprise takes when implementing ERM.

Table 3: Summary of ERM practices (all responses)

There is a standard normal distribution for the components, with a mean of 0.0 and a standard deviation of 1.0.

FINDINGS AND INFERENCES FOR PRACTITIONERS

The practises of Indian managers in risk management can be better understood through the examination of primary data gathered from a diverse group. When it comes to COSO ERM, Indian organisations show a wide range of adoption, indicating that the journey for ERM adoption in Indian organisations is just getting started. A similar finding from Gupta (2011) found that only 6% of organisations had finished implementing ERM to its fullest extent. ERM policy formulation, appointment of a CRO, risk identification, and preparation of risk mitigation plans appear to be the most popular practises for risk management at this point in time.

Using principal components analysis on the gathered data, three orthogonal groups of risk management practises can be extracted. Structure for risk management, risk management records, and risk management activities are all part of risk management. A company's ERM practises can be gauged by these three components, with minimal data loss. Public sector organisations have a better risk management structure than private sector organisations, while private sector organisations excel in risk management activities. More sophisticated practises are evident in all three components of the service sector, particularly in Structure and Record keeping. There is no correlation between the size of an organisation and its risk management practises, as expected. Practiced managers can compare their risk management methods with those used in the service, public, and private sectors.

Risk management practises were found to be influenced by organisational maturity. To a lesser extent, corporate planning and review appear to influence risk management record keeping. A culture of competition and performance, as well as boldness, reducing uncertainty avoidance, and increasing the frequency of performance monitoring are all good ways to improve risk management record keeping. The presence of internal audits is likely to have an impact on Structure for Risk Management, among other things. Possibly, the findings of the internal audit prompt the top management to implement formal risk management, whose first step is to establish a framework for doing so.