New-Age Enterprise Risk Management: A Paradigm Shift Aimed at Safeguarding the Bottom Line and Strengthening Corporate India’s Balance Sheet

Introduction

Enterprise Risk Management (ERM) takes a holistic approach to risk by evaluating it at the entity level. Its primary objective is to identify significant risks that could threaten the business model and viability and develop robust mitigation strategies in collaboration with stakeholders forming part of the first line of defence.

ERM is designed to create value across all stakeholder functions by proactively identifying and addressing current and potential risks. This ensures the organisation remains on track to achieve its business objectives and strategic goals.

In an environment defined by VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) and BANI (Brittle, Anxious, Non-linear, and Incomprehensible), one function which plays a pivotal role in safeguarding a company’s balance sheet and sustaining its leadership position is —Enterprise Risk Management.

Integrating ERM into both strategic planning and daily operations is crucial for an organisation’s long-term sustainability. More than just a risk-monitoring function, ERM serves as the eyes and ears of the business, providing critical insights that shape decision-making.

As organisations grapple with a growing array of emerging risks that challenge long-term viability, it is essential for risk management to drive core business decisions. The following section provides a high-level overview of the top three emerging risk areas that demand close attention.

Critical New and Emerging Risks

1. Climate Change Risk Management

One of the most pressing challenges organisations face today is the far-reaching impact of climate change events. Addressing climate risks is no longer optional—it is a necessity to ensure a sustainable future for generations to come. Businesses have a pivotal role to play, and effectively managing climate-related risks is crucial for achieving profitable and long-term growth.

The Task Force on Climate-related Financial Disclosures (TCFD) has set the global benchmark for climate risk disclosures.  TCFD was a group set up on the request of the G20 nations by the International Financial Stability Board (FSB). FSB has now asked the IFRS Foundation to take over the mantle from TCFD

A robust Climate Risk Management strategy must incorporate both Physical Risk Management and Transition Risk Management into core business decision-making. By doing so, organisations can build resilience, enhance stakeholder confidence, and align with evolving regulatory and investor expectations.

2. Geo Political Risk Interconnections and Their Management

Ongoing global conflicts, economic sanctions, joint military exercises, trade tensions, and shifting geopolitical alliances have far-reaching consequences, rippling across supply chains and impacting businesses across industries. These developments create multi-dimensional risks that can disrupt operations, financial stability, and long-term growth.

Understanding the interconnectedness of geopolitical risks from a 360-degree perspective is crucial for managing bottom lines and ensuring a resilient balance sheet. Organisations must proactively assess these risks, factoring in their potential impact on supply chains, regulatory environments, and market access.

A key component of geopolitical risk management is effective country risk management. Businesses must diversify exposure rather than relying too heavily on a single country or a group of countries. Conducting a thorough country risk assessment enables organisations to make informed strategic decisions, explore new markets, cap the level of their exposures and mitigate potential disruptions.

3. Artificial Intelligence – Governance

The day is not far when every company will have a Chief Artificial Intelligence (AI) Officer.

Regular, detailed risk assessments at predefined intervals, complemented by feather touch, ongoing risk evaluations, are essential to monitor AI effectiveness and ensure the continued relevance of AI models. Additionally, Ethical AI must be a key focus to uphold strong corporate governance.

Conclusion

Core risk groups—Market Risk, Operational Risk, Credit Risk, Business Risk, Strategic Risk, Technology Risk, Regulatory Risk, and Reputation Risk—have always been and will continue to be critical for every company. However, emerging risks, as outlined earlier, also require due recognition to ensure risk levels remain within defined appetite and tolerance thresholds.

ERM is fundamentally proactive, not reactive. It is essential to continuously review existing ERM practices, assess evolving business conditions, economic shifts, and changes in systems and processes, and ensure that ERM remains aligned with the dynamic needs of both the business and the economy.

Authored by:

Mr. Delzad Dinyar Tanaz Jivaasha

Deputy Vice President – Enterprise Risk Management & Information Security

ICICI Lombard General Insurance Company Limited

Mr. Delzad Dinyar Tanaz Jivaasha has 21 professional qualifications and certifications to his credit and has a rich and diverse work experience of 17 years across varied and diverse organizations, covering core domains in Enterprise Risk Management, Operational Risk Management, Market Risk Management, Environmental, Social and Governance (ESG) Risk Management, Climate Risk Management, Business Continuity Planning & Crisis Management, Finance & Accounts & Legal and Compliance.

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