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Council on Corporate Governance and Risk Management — India
Mumbai, 14 September
Twenty CFOs, chief risk officers, company secretaries and board directors attended the 6th meeting of the Council on Corporate Governance & Risk Management — India.
The meeting opened with a discussion about global financial centres. Corporate concern about stricter regulations in the US such as Sarbanes-Oxley means that New York is losing its prominence. London, Dubai and Tokyo are being seen by Indian companies as alternatives for raising capital.
Financial Reporting Standards
The Institute of Chartered Accountants in India (ICAI) has recently announced its decision to fully converge with International Financial Reporting Standards (IFRS) from April 2011. Richard Rekhy, Chief Operating Officer, KPMG India, led a session on the strategy of convergence to these principle-based reporting standards. IFRS will affect business combinations and consolidation, use of financial instruments, changes in accounting policies and correction of standards, and the presentation of financial statements.
IFRS convergence will have a complex impact on the mindset of Indian bankers, institutional lenders and revenue officers. This needs to be recognized if implementation is to run smoothly. If India wants to emerge as a global financial centre, it will need to focus on its talent pool, developing education, and faster convergence to IFRS before 2010.
Global M&A Activity
Mergers and acquisitions are increasing globally, and with private equity money readily available, it is now easier to buy larger companies. What does this mean for Indian companies? Council members agreed that the key risk of global M&A activity is people integration. Companies will need to set up a high-level integration team to discuss products, raw materials, people materials, people management and cost savings.
Assessing the Climate for Enterprise Risk Management (ERM) in India
New Conference Board Research
Sponsored by KPMG India and SAP India, new Conference Board research is underway to assess if and how corporate boards and senior management are moving from a focus on internal controls to a more comprehensive ERM framework and towards integration of this framework with the board's strategic oversight responsibilities.
Three presentations at this Council meeting contributed to this research project. These were case studies on ERM implementation from ICICI Bank, Tata Motors and Dr Reddy's Laboratories. They stressed that companies need to appreciate risk as a "culture" by monitoring and reporting risk at all levels. The ERM process helps to build a strategic approach. One way is to recognize "risk groupings" via process risks, mitigation urgency, risk scores and mitigation initiatives.
