Rajeev Tanna, chairman of the IRM India Regional group and head of risk management and internal compliance at Tata Consulting Engineers shares the greatest risk management challenges for businesses operating in India in 2024

This article was created by the Institute of Risk Management. You can join the IRM’s India Regional Group here

The Indian Economy is one of the fastest-growing economies in the world with a strong focus on digitisation.

Initiatives like Make in India, National Infra Pipeline, the government’s focus on ease of doing business, GST implementation, PLI schemes, Banking initiatives like UPI, Central Bank Digital Currency (CBDC) pilot etc. have helped India in its progress in recent years.

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The country needs to continue its robust approach by having a dual focus on strong governance and growth for it to be sustainable. It needs to forge its way ahead by effectively managing the mesh of risks and challenges it faces.

The top five risks affecting India:

Cybersecurity Threats:   The increasing digitisation of Indian businesses makes them susceptible to cyber threats, including data breaches and ransomware attacks. 

Geopolitical Tensions:   India’s geopolitical landscape introduces risks related to border tensions, trade disruptions, and diplomatic challenges.

Climate Change and Environmental Risks:   Given India’s vulnerability to climate change, environmental risks such as extreme weather events and resource scarcity are significant concerns.

Economic Uncertainties:   Fluctuations in the global and domestic economy, exacerbated by factors like inflation and currency depreciation, present economic risks.

Regulatory Changes:   Rapid shifts in regulatory frameworks, particularly in response to ESG considerations, pose compliance challenges for businesses operating in India.

The Indian economy has been buoyant in 2023 and grew by 7.6% during the July-September quarter of FY24 (Q2FY24). The rise in GDP growth was supported by government spending and robust performance in manufacturing, mining, and construction sectors.

India will have to count on its own domestic consumption to fuel its growth, specifically, private consumption and investment spending.

Some of the key risks that may pan out in India during 2024 include:

  • Lok Sabha elections in 2024: It will be important to watch if the Modi government is voted to power for its third term. Political surprises or instability may jeopardise the growth targets for India and may impact market sentiments due to risk of policy and strategic initiatives disruption. Besides possibility of high-profile events to destabilise the fabric of the nation through riots, terror attacks, etc. in India and outside on Indian establishments would remain a concern for India.
  • Direction of key Government policies like PLI schemes, Infrastructure push, Global Capital flows in India through Foreign Direct Investment FDI and Foreign Portfolio Investors, geopolitics, foreign policy advocacy is expected to be of key concern. 
  • Crude oil prices breaching US$100 per barrel for a prolonged period would be a risk for India which may impact the fiscal deficit.
  • Interest rate strategy of RBI which is driven inflation levels both within and outside the country would be an important aspect to watch out for.
  • Risk of recession in developed countries like USA and Europe may impact Indian economy as well considering less demand from some of major trade destinations. 
  • With the growth in digital initiatives and digital penetration in India, risks related to cyberattacks, malware, phishing, Distributed Denial of Service (DDoS) attacks, ransomware, malvertising etc. are expected to be of concern. New AI based risks like Deepfakes etc. may emerge. Hence the need for digital risk frameworks which would help organisations to protect against digital risks, comply with relevant regulations, and improve efficiency and resilience.
  • Potential of prolonged global crises like Russia-Ukraine conflict, Israel-Hamas war, US-China trade tensions, China-Taiwan escalation etc. leading to second-order implications for financial stability and supply chain disruptions. 
  • Climate change and natural disasters – the level and impact of such events are increasing year-on-year. A case in point - floods in Chennai in December 2023 due to the Michaung Cyclone, El Nino led vagaries in rainfall pattern which may impact crops and increase in food insecurity further fuelling inflation.
  • Possibilities of more pandemics like Covid-19 which may lead to an impact on growth in the short term. China is already impacted by Mycoplasma pneumoniae, the bacteria linked to the recent surge in cases of respiratory illness (pneumonia) amongchildren in China.
  • Potential of armed conflicts with either of India’s neighbours or both – China and Pakistan cannot be denied considering the intermittent tussles at border areas.
  • Effective utilisation of workforce and unemployment levels will remain a key monitorable to improve the productivity levels.

Key Macro Factors:

  • Technological Advancements: The rapid integration of AI, blockchain, and data analytics is transforming risk assessment, mitigation, and compliance processes.
  • Globalisation and Geopolitical Shifts: Increasing interconnectedness exposes businesses to geopolitical risks, trade uncertainties, and regulatory changes on a global scale.
  • Regulatory Dynamics: Evolving regulatory frameworks, especially in response to environmental, social, and governance (ESG) considerations, require constant adaptation.
  • Balancing growth objectives: Population growth and scarcity of resources requires balancing needs versus availability of resources.

Key Micro Factors:

  • Cybersecurity Threats: With the increasing reliance on digital platforms, cybersecurity remains a critical concern, encompassing data breaches, ransomware, and other malicious activities.
  • Supply Chain Vulnerabilities: Disruptions to global supply chains, whether due to geopolitical tensions or unforeseen events, pose significant risks to businesses.
  • Talent Management: Attracting and retaining skilled professionals is a micro-level concern that directly impacts an organisation’s ability to manage risks effectively. Blurring / overlap of functions to an extent not imagined before (e.g., Analytics & AI in almost every function).
  • Economic Volatility: Fluctuations in economic indicators, inflation rates, and currency values directly influence financial risks for organisations.

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