New index to help India Inc manage risks amid Covid

Private sector general insurer ICICI Lombard has come out with a corporate India risk index, an indicator of a company’s risk exposure and preparedness. It spans across 15 sectors of the economy and has 150 companies under it, currently.

According to the index, India Inc’s score is 57, which implies that firms are handling risks effectively. However, at a more granular level, the index indicates that new-age companies, and those in hospitality and logistics sectors could do a lot more in terms of handling risks.

Companies are mostly engaging with operational and natural hazard risks because of the pandemic. But, there needs to be an improvement in managing economic, technological, and security risks.

The risk index is arrived at after calculating the corporate house’s exposure and management of various risks. Across sectors, this index looks at market and macro factors, operational and physical risks, risks related to technology, security, and those associated with natural hazards.

A score in the range of 50-60 indicates optimal risk exposure and management. A score in the range of 30-50 implies that the corporate house is not handling risk effectively and management practices are inefficient.

Similarly, a score below 30 means the company has very high exposure or very poor risk management practices or both. On the other hand, a score of 60-80 implies effective risk management and practices, while a score beyond that implies that the company has invested heavily in risk mitigation.

New-age companies, and those in hospitality and logistics sectors have scores in the range of 30-50. Hence, they have significant gaps in risk management practices.