Risk management is a rigour of improving the probability of survival and success, particularly in an uncertain and complex environment. A robust risk management framework should enable organisations to understand, manage and mitigate risks. However, it also includes a strong dosage for taking risks. Unfortunately, risk management is sometimes misunderstood as a bureaucratic hindrance on businesses rather than a disciplined approach in value creation.
For sustainable competitive advantage, organisations need to take daring decisions and calculated risks through intelligent risk management. This enables competent decision making even when decisions need to be taken with incomplete and conflicting information under stringent timelines.
For enduring success, organisations must have optimal risk mitigation practices that encourage innovation in the pursuit of some aggressive investment opportunities, but ensure that they avoid the pitfalls in the way. This is even more relevant in the current uncertain business environment. While the natural tendency of organisations at such times would be to preserve cash and avoid risks, it is important for smart enterprises to spot opportunities and take steps for long term value creation even during such period of gloom.
At L&T, while focus has always been on risk management and liquidity, the Group has never hesitated in taking bold decisions. This is the greatest learning I had during my tenure as the CFO of L&T, particularly post the Lehman crisis. And it is due to this approach that L&T Finance ventured to bid for Fidelity's Mutual Fund business this year.
As John F. Kennedy once said: "There are risks and costs to a programme of action. But they are far less than the long-range risks and costs of comfortable inaction."