RBI governor Shaktikanta Das has advised businesses to put in place corporate governance and risk management systems in place for long term sustainability of their business in an environment where decisions are increasingly technology driven.
Such practices are also a prerequisite for financial stability of the system, he said. The Reserve Bank is also expected to come out with a regulatory framework for technology based digital lending that is fact picking up.
“ Risk taking is the essence of doing business. What I am now emphasizing is the need to carefully weigh the upsides and downsides of every risk before embarking upon it” said RBI governor ShaktiKanta das, speaking at an event organised by the Central Board of Indirect Taxes and Customs in Mumbai on Thursday. “ Long term success of any business is directly linked to its quality of governance, internal control systems and the robustness of its risk and organisational culture”.
The Reserve Bank has been pushing for improvements in the governance and compliance culture of its regulated entities through a series of measures. “ With regard to digital lending platforms, it is work in progress” governor Das said. “ Very soon we are coming out with a broad regulatory architecture which should be able to deal with the challenges with regard to lending through digital platforms, many of which are unregistered, unauthorised and illegal.”
Das underscored the need for a robust corporate governance framework would require that businesses follow prudent accounting practices and provide transparent disclosures. Sufficient information should be made available to the market participants to enable them to make informed judgments about the health and viability of a business entity. “ Creative and aggressive accounting techniques and policies tend to overstate financial strength and would be detrimental to the long term sustainability of a business” Das said. “The Board of Directors and the Audit Committee should ensure that integrity of the financial statements is not compromised in any manner”.
Decision making is increasingly supported by insights from data analytics, artificial intelligence and deep learning. There is almost a real-time assessment of customer needs, innovations and market trends that is helping manufacturers to manage production capacities, save costs, reduce risks and meet evolving customer needs more quickly. “We are in the age of data-driven smart manufacturing. If Indian businesses aspire to remain competitive and attain world-class status, it is important that they gear up to make the right investments sooner than later” Das said.
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