Pankaj Kumar Gupta

Risk management in Indian companies: EWRM concerns and issues

Purpose - The purpose of this paper is to examine the current status of risk management in Indian companies and explore the reasons for the adoption or lack of adoption of integrated approach to risk management. It identifies the imperatives for implementation of comprehensive risk management solutions leading to enterprise-wide risk management (EWRM). The paper shows that effective risk management can improve organizational performance but adequate infrastructure is not available in companies for implementing EWRM. Design/methodology/approach - Exploratory design using the survey research methodology that includes structured questionnaires and interviews of 130 companies. Findings - Risk management in Indian companies is currently facing the problem of integration and incentivisation. The risk management function is not suitably blended into the corporate strategy and use of information technology for risk management is minimal. The portfolio approach to risk management titled as integrated risk management or EWRM is ineffective from an implementation perspective and a sea change in risk perception is required which accentuates the need for building up of risk culture across business segments and adequate incentivisation for risk management. Practical implications - Risk management is an integral part of the decision-making process and effective risk management can proactively help in overcoming the possibilities of the business failures. Originality/value - The paper highlights the fact that knowledge of risk management in Indian companies is inadequate and sample companies hesitate to respond thinking that it may reflect inefficiencies.

Corporate frauds in India - perceptions and emerging issues

Purpose – The purpose of this paper is to examine the nature and perception of corporate frauds in India and their consequences in the business and economic systems, and it highlights the emerging issues so that existing legal and regulatory obligations can be redefined and structured. Design/methodology/approach – An exploratory research was conducted through a combined mode of literature review; case studies; structured questionnaires from 346 sample companies; and 43 interviews with the corporate professionals, management, investors, government offices and authorities having wide experience. Findings – It was found that the regulatory system is weak, and there is dire need to redefine the role of auditors. Coordination among different regulatory authorities is poor, and after every scam, there is a blame game. Reporting of fraud and publication of fraud prevention policy are missing. Banks and financial institutions are ineffective on due diligence, and there is a lack of professionalism on the board a...

Logistic Predictive Model for SMEs Financing in India

Credit assessment risk for small and medium enterprises (SMEs) offers special challenges to practitioners, regulators and academics. The lenders’ design of the package of credit to SMEs may affect the propensity to default or lead to delinquency. Considering the fundamental role being played by small-sized industries in Indian economy and emphasis on inclusive economy, we aim to develop a default prediction model, specifically for SMEs. Apart from the conventional ‘ability to pay’ basis of analyzing borrower-centric default risk, there may be a set of other explanatory variables that can be modelled to assess the credit default. The study here examines the behaviour of relevant measures of default risk and explores the most significant variables of the financial package to construct a model for SMEs by applying multinomial logistic regression technique. The study is based on database covering two years of the time period from 2007 to 2009 on 2,864 SMEs pertaining to an emerging cluster obtained from a prominent financial institution in Delhi.

Neural network credit scoring model for micro enterprise financing in India

Purpose - Quantitative methods known as scoring models have been traditionally developed for credit granting decisions using statistical procedures. The purpose of this paper is to develop a non-parametric credit scoring model for micro enterprises that are not maintaining balance sheets, and without having a track record of performance and other credit-worthy parameters. Design/methodology/approach - Multilayer perceptron procedure is used to evaluate credit reliability in three classes of risk, i.e. bad risk credit, foreclosed risk credit and good risk credit. Findings - The development of a neural network model for micro enterprises facilitates bankers and financial institutions in credit granting decisions in an automatic manner in the Indian context. Originality/value - This study applies comprehensive information on parameters of financial package prepared by Indian financial institutions and banks to micro enterprises to design a credit risk model. This model, instead of categorizing borrowers in terms of their “ability to pay”, attempts a solution to the unsolved problem of credit availability to micro enterprises in an Indian context, having no past performance track record.