AN

INTERNATIONAL SEMINAR ON

“RISK MANAGEMENT STRATEGIES, COMPLIANCE AND

CORPORATE GOVERNANCE”

Organised by

SIVA SIVANI INSTITUTE OF MANAGEMENT.

KOMPALLY, SECUNDERABAD.

ANDHRA PRADESH

In association with

Professional Risk Managers’ International Association (PRMIA), USA.

&
International Institute for Insurance and Finance (IIIF), Hyderabad.

Seminar organized on 25th July 2009,

9.30 am to 5.30 pm

At

Hotel Katriya Towers

Somajiguda, Hyderabad, Andhra Pradesh

The Seminar focus
The key focus areas of the seminar were:

1. Different types of risks faced by the organizations like Strategic risk, Operational risk,
Credit risk, Market risk, Investment risk, system risk and others.
2. Risk management practices and its importance in present business environment
scenario.
3. Importance of compliance in the organizations.
4. Corporate governance practices in India.

Guests of Honour
Mr. Nrupendra Rao ---------- Chief Guest of Inauguration Ceremony

Mr. M.S.R. Murthy ---------- Chief Guest of Valedictory Ceremony. Mr. Murthy worked

as the chairman of State Bank of Mysore.

The Eminent speakers

Dr. Yarram Raju, B.

Regional Director of Hyderabad chapter of PRMIA. Former senior faculty and Dean of
studies of the Administrative staff college of India, Hyderabad. Worked thirty years with
State bank of India. Served as Director of Institute of Public Enterprises, Osmania University,
Hyderabad and Indian school of Economics. Member of standing advisory committee of
Reserve bank of India on SMEs.

Dr. S. Subbaiah

Professor of Banking and finance in Administrative staff college of India, Hyderabad. Deputy
General Manager of Reserve bank of India. Areas of interest are Money, Banking and
Finance.

Mr. Pasupati Kumar

Having 22 years of experience in Industry. He is a chartered accountant, Cost accountant and

also having a degree of Company secretary. He is chief finance officer and director of
Deloitte, Hyderabad.

Mr. Rama Krishna S.V.

He is an advocate in High court of Andhra Pradesh, a corporate legal advisor. Retired as

Assistant General Manager in 2003 from Industrial Finance Corporation of India, having
spent 26 years in the organization. He is panel advocate of IDBI bank, Allahabad bank and
Bank of India.

Participants
1. Delegates from Industry.
2. Delegates from Educational Institution.
3. Students from Siva Sivani Institute of Management
4. Students from other management and professional Institutions.

Chief Co-ordinator
Professor V.G. Chari,

Director- Academic, Siva Sivani Institute of Management, Secunderabad.

Co-ordinators
Professor C. Sudhakar, Faculty (Finance), Siva Sivani Institute of Management.

Dr. Murlidhar Prasad, Assistant professor (Finance), Siva Sivani Institute of Management.

Dr. N.C. Rajyalakshmi, Assistant professor (Finance), Siva Sivani Institute of Management.

Dr. S. K. Kompalli, Assistant professor (Finance), Siva Sivani Institute of Management.

Dr. Pardha Saradhi, Assistant Professor (Finance), Siva Sivani Institute of Management.

Sponsors of the Event

1. State Bank of Hyderabad.
2. Canara Bank.
3. Bhagwati Films, Hyderabad.
The Event summary

Inauguration

Inauguration by Mr. Nrupendra Rao in presence of Mr. Sailesh Sampathy, Vice President,
SPS Siva Sivani group of institutions, Mr. K.S. Ramchandra Rao, Group Director, Siva
Sivani group of Institution , Mrs. Deepika Sampathy, Director Administration, Siva Sivani
Institute of Management, Delegates from Industry and educational Institution.

A brief introduction of Risk Management and compliance by chief guest of Inauguration

ceremony Mr. Nrupendra Rao.

Vote of thanks to Respected Chief guest of the Inauguration ceremony Mr. Nrupendra Rao
by Mr. K.S. Ramchandra Rao, Group director, Siva Sivani group of Institution.

Technical session – 1 An Insight to risk Management and Corporate governance

Mr. Yerram Raju gave a brief insight about Risk management, compliance and corporate
governance issue in the first technical session of the seminar.

The key points mentioned by Mr. Yerram Raju were:

 There is need for optimization in the use of the limited resources, so that we could get
gain on our investments.

 Risk management practices are not fully integrated in many institutions.

 According to Deloitte 6th survey on Global risk management, 49% of the Institutions
have completely or substantially incorporated responsibilities for risk management in
performance goal and compensation decision for senior management.

 Staff account is considered as the biggest risk for the banks.

 Only 36% of the Institutions have Enterprise management program (EMP) for risk
management. About 23% of the organizations are proceedings in this direction.

 Banking and Financial Institution have made substantial progress towards complying
with BASEL 2 norms. Half of the Institution subjected to BASEL 2 reported that they
had adopted the norms.

 53% of the Institutions have their own Risk Model.

Mr. Raju indicated the dependence of risk perception on various factors like:

1. Aggressive and conservative approach.

2. Competitiveness and Innovativeness.

3. Size of the Balance sheet and Off balance sheet

4. Selection of the new Products

5. Supervisory and regulatory compliance.

6. Selection of constituents like credit rating, credit scoring, due diligence, etc.

Key features of the present Environment are indicated by him as:

1. For the Risk mitigation Institutions are using credit transfer products and derivatives.

2. Emergence of new financial products result in increased complexity and change in

market liquidity conditions.

3. Symbiosis between market and financial institutions is growing rapidly.

Lessons from Financial Crisis were mentioned by him as

1. Transparency in reporting is needed.

2. A comprehensive system of internal control is required.

3. Every individual of the organization must contribute in risk mitigation practices.

4. Multiple regulatory systems are needed.

5. Remuneration practices should be abolished.

The view of Mr. Raju about corporate governance was:

1. Internal as well as external corporate governance is needed. It should be strong and

powerful.

2. Trust must be developed among all the stakeholders of the organization.

A reputed company was defined by Mr. Raju as company with:

1. Core values

2. Quality of products and services.

3. Ethics, trust integrity and transparency.

4. Responsibilities towards wealth creation for share holders.

5. Responsiveness to change.
 6. Good and transparent track record.

What could be done in an organization to implement corporate governance?

1. Board level risk committee should be there. Only non executives should be there in
the committee.

2. Regular public disclosure is required.

3. Committee should have power to investigate huge transaction and if necessary block
the transactions.

Technical session 2 : An insight of Regulation and compliance

Dr. Subbaiah stated out the following points about Regulations and compliance issues in the
second session of the seminar:

 The present financial crisis weakened the confidence of the public at large in free
market and capitalism.

 Regulation is emerging as a major policy instrument to correct market failure.

 Role of regulation is to improve efficiency of the capital.

 The underlying focus of regulations is to develop confidence in financial system.

Objectives of the regulations as explained by the speaker are:

1. Consumer protection.

2. Efficiency of financial systems

3. Reduction in transaction costs.

4. Closely work with monetary policy.

5. Promoting financial stability.

6. Capital adequacy regulation to ensure soundness of financial systems.

Pillars of the regulation as stated by the speakers are:

1. Governance

2. Risk management

3. Audit

4. Compliance
Over the period of time these four pillars strengthen in India, hence regulation become
successful in Indian Financial System.

The recent Satyam case questioned the role of audit in risk management. The speaker stated
following solutions for this problem:

1. Auditor should not be soft towards the management.

2. Rotation of the auditor is very necessary.

3. Different auditors for different audit works.

4. Ensure independence of Independent auditors.

To mitigate the risk BASEL 2 norms were introduced for financial systems. There are three
pillars of this new accord;

1. Minimum capital requirement to mitigate credit risk, operational risk etc.

2. Supervisory review

3. Market discipline

Market discipline is stated as

1. Disclosure requirement

2. to risk exposure

3. risk assessment

The speaker also indicated some issues with BASEL 2:

1. compliance functions has to be robust

2. Human resource and skilled person are required

Strengthening regulation and compliances can be done in following ways:

1. knowing the source of market value it may be monopoly anti competitive behaviour
asymmetric information or market misconduct

2. more disclosure

3. more competitive atmosphere

4. Corporate governance

5. There should be regulations on new players and instruments like hedge funds and
CDOs

6. There should be transparency in accounting and full accounting disclosures

 Optimum regulation is required to make the financial institution more efficient on in one
hand and on the other hand they should be provided enough opportunity to exploit the
funds for growth and development but it is difficult to determine the optimum regulation
level.

What happened with Satyam? This matter was explained by speaker to audience:

The four major failure results for failure of the company

1. Risk management failure

2. Corporate governance failure

3. Auditing failure

4. Fraudulent activities

They were certain questions to be answered before scam

1. Why Satyam was paying 30% more than the market average to its auditor?

2. Why Satyam share prices were always had 30% discount?

These questions should be answered long before the scam as they were indicating some
fraudulent activities in the organization

The speaker gave some suggestions on these issues

1. Recruit professional directors, paid professionally independent directors

2. Government should give clear guide lines for role of independent directors.

3. Independence directors should be independent in their decision and activities.

The speakers say “Unless the compliance becomes culture instead of the game financial
crises cannot be omitted.”

Technical Session 3: Use of Information Technology in compliance

Mr Pasupati Kumar of Deloitte gave insights on applications of information technology in

compliance. Deloitte has developed a programme (web based e room technology for
compliance practices- Stay Compliant)

Mr Pasupati Kumar discussed a case study on application of IT in compliance practices with

the audience
The case study points were

1. Compliance calendar reporting mechanism will inform the persons to fulfil their
duties in timely manner

2. It will inform the client about income taxes.

3. It will inform about the new events and dues.

4. It will provide legal updates to the client.

5. It will provide registration documents online.

6. One cans send query to Deloitte to know about any compliance aspects.

The benefits of Deloitte Compliance programmes are

1. Online compliance monitoring.

2. Reduction of risk of non compliance

3. Reduce the likelihood of penalty

4. Part of performance appraisal

5. Repository of compliance proof

6. Management information system,

Technical Session 4: Company law, 1956 and corporate governance

The last session of the seminar was addressed by Mr. Rama Krishna. He discussed about the
provisions of Company act with regard to the corporate governance practices. The valuable
information’s given by Mr. Rama Krishna are summarised below:

Governance of a company is in hand of board of directors.

Relationship between stakeholders and board of directors is of Fiduciary capacity.

Speaker told about the reason behind the failure of corporate governance practices as:

1. Lack of adherence to good corporate governance practices.

2. Cosy relationship between top management and auditors.

3. Unreasonable management remuneration packages.

4. Lack of transparency in accounting practices.

5. Insufficient disclosure.
 6. Lack of credibility of corporate communication as in Director’s report, auditor’s
report etc.

7. Lack of optimum balance of executive and non executive directors and a few
independent directors in organizations.

The speaker also mentioned amendments in Company act 1956, for corporate governance
practices:

Section 217 Board report

Section 292 Audit Committee

Schedule x‫׀׀׀‬ Managerial remuneration.

Clause 49 of the Company act 1956, give the guidelines for corporate governance practices in
the organizations.

With the help of balance sheet of Satyam, the speaker stated, the non independence of
independent directors in Satyam board. They were paid by the company heavily. So one
cannot expect fair role of these independent directors in performing their duties.

The speaker emphasised on the fair roles of independent directors, transparency in policy and
ethical behaviour of the Board of the directors of the company in order to maintain effective
corporate governance in the organization.

Valedictory ceremony
The chief guest of the valedictory Ceremony Mr. M.S.R. Murthy addressed the audience
about the compliance practices in the banks. He gave the insights about the power of a labour
inspector in case of compliance violation. Even they can sue the chairman of the bank for
violation in compliance practices. Violence of compliance is a criminal offence, as stated by
law and mentioned in the seminar by respected chief guest of Valedictory Ceremony.

Dr. K.S. Ramchandra Rao, Group Director, Siva Sivani group of Institution proposed vote of
thanks to all the guests, speakers, delegates and students for their participation in the
International Seminar organized by Siva Sivani Institute of Management in collaboration
with PRMIA and IIIF, Hyderabad.

(Report submitted to Siva Sivani Institute of Management by Pratik Shukla)