FRMM

Comparative report on risk disclosure of a Non-financial institution

and a Financial Institution

Submitted by: - Group 7

Unnikrishnan Nair- MBA07153

Ankit Naithani- MBA07067
Rahul Daswani- MBA07039
Sandeep Sahu- MBA07102
Yesekar Rohit Govind- MBA07237
Mohit- MBA07214

Submitted to: Teaching Associate:

Prof. Jagriti Srivastava Mrs. Nawneet Kaur

 Nestle

Risk Disclosure Overview:

The risk disclosure of Nestle India includes Financial, Compliance, Operational and ESG Risks.
The company provided a list of all the risks significant to its operations and performance, along
with steps it has taken to reduce and manage those risks. The document did not quantify any of
the risks and was entirely qualitative.

Industry Risk:

The company's primary areas of focus are non-alcoholic beverages and the food industry. The
majority of 66% of Nestle's sales revenue is from food, with the remainder coming from non-
alcoholic beverages. The food and non-alcoholic beverage sectors are characterised by low-profit
margins and modest growth expectations.

Financial Risk:

To ensure that sales and production continue despite potential disruptions, the company has
grown its raw material and packaging material stocks. This has eventually led to low liquidity
due to high inventory days. The company has a low debt-to-equity ratio, which has shown to
over-reliance on equity, eventually leading to a high cost of capital.

Operational Risk:

The company operates on a large scale, with over 2,000 branded products in 186 nations. The
company is able to retain clients in a highly competitive climate thanks to its strong brand
portfolio and widespread familiarity. The profitability margins for the products are low.

Country Risk:

The company's presence in numerous countries shields it from the risk posed by the economic
and political conditions of a particular area. The US accounts for the maximum revenue,
followed by China, Europe and MENA.

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 State Bank of India

Risk Management at State Bank of India includes risk identification, risk assessment, risk
measurement and risk mitigation, with its main objective being to minimize the negative impact
on profitability and capital.
The various risks across the Bank and the SBI Group are monitored and reviewed through the
Executive Level Committees and the Risk Management Committee of the Board (RMCB),
which meets regularly.

Credit Risk and its Mitigation

SBI has put in place reliable frameworks for credit assessment and risk management that allow it
to recognise, quantify, track, and manage the risks associated with credit exposures.
To guard against concentration risk, the Bank maintains an industry concentration limit
framework that is reviewed every quarter.
Additionally, SBI has a "Dynamic Review of Internal Rating" Framework that makes it easier to
recognise stress early and initiates the necessary mitigating actions.
At regular periods, the Bank analyses the risk and return of significant portfolios to see whether
the return is adequate given the exposures' risk.

Market Risk and its Mitigation

Market risk management at SBI analyses and quantifies risks as well as monitoring, reporting,
and mitigation methods. Market risk is managed using a clearly defined Investment Policy,
Trading Policy, Market Risk Management Policy, and Market Risk Limit Policy, all of which
have been approved by the Board. These policies cap the risk in various trading desks or
securities by setting trading risk limits or triggers for efficient and prudent management of
investment funds.
Some of these risk management tools are Position Limits, Gap Limits, and Sensitivity Limits,
such as Modified Duration, Value-at-Risk (VaR) Limit, Stop Loss Trigger Level, Forex Daylight
Limit, and Options Greeks which are monitored on an end-of-day basis.
SBI undertakes risk-adjusted performance analysis of its domestic and overseas portfolios. IT
has also initiated suitable measures to ensure a smooth transition from LIBOR to Alternate
Reference Rate (ARR).

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Enterprise Risk and its Mitigation

Enterprise Risk Management strives to establish a thorough framework for managing and
coordinating risk with strategy at the level of the entire Bank.
SBI has encompassed best practices such as establishing a Risk Appetite Framework, Risk
Culture Assessment Framework, and Material Risk Assessment.
Every year, SBI does a thorough Internal Capital Adequacy Assessment Process (ICAAP)
exercise to determine the capital adequacy at the solo and group level in normal and stressful
conditions.
SBI is dedicated to managing climate-related risks and opportunities in order to address concerns
about climate change.

Group Risk and its Mitigation

Group Risk Management aims to establish standardised risk management processes in group
entities. Regular monitoring of the consolidated prudential exposures and group risk components
is implemented. The ICAAP (Internal Capital Adequacy Assessment Process) exercise is
performed by all group entities, including non-banking entities, where SBI has a share of 20% or
more and management control. To maintain uniformity, a Group ICAAP Policy has been put in
place.