Operations Risk: Operations risk emerges as key concern for Indian bluechips

Mumbai: ‘Operations risk’ has emerged as one of the key concerns for India’s bluechip companies as the outbreak of Covid-19 pandemic has disrupted the client and supply chains across the globe. According to a survey conducted by Excellence Enablers – a corporate governance firm founded by former Securities and Exchange Board of India(Sebi) chairman M Damodaran – 46 out of the Nifty Fifty companies have reported Operations risk as a key concern in their FY20 annual reports. In FY19, only 29 companies viewed operations as a risk area.

Operations include everything from procuring the raw materials to selling the end products. For the services industry it includes the cycle of getting business to executing the task. While the risk may be on account of disruptions due to the pandemic and lockdowns, companies have been conservative when it comes to terming Covid-19 itself as a risk.

“It is interesting to note that in FY 2019-20, with annual reports being published several months post the closure of the FY, only 28 companies have recognised Covid-19 as a risk,” the report said.

According to the report, Financial risk is the most prominently featured risk by the companies as all the 50 under study have mentioned it as a key risk. The number was 48 in FY19. Financial risk involves risks related to credit, market liquidity, interest rates and foreign exchange rates.

In FY20, IT risks took a backseat with only 42 companies calling it a risk against 46 in FY19. IT risks include issues such as data privacy, cyber threats, and other system related issues. This is a key component for services companies including the banks and IT companies.