IIM Ahmedabad Celebrates Confluence 2009

IIM Ahmedabad Celebrates Confluence 2009

Mr. Deepak Satwalekar, MD and CEO, HDFC Standard Life Insurance Company Ltd, on the other hand, focused on the underlying roots of the problems with the present financial systems. He pointed out that the crisis had revealed the fundamental weakness in the international banking system.

Highlighting the subprime lending situation, Mr. Satwalekar posited that the crisis resulted from the failure of corporate governance and the inability of the people responsible to identify and react to the impending meltdown. Taking this further, Mr. Satwalekar held the shortened horizons of performance monitoring responsible. Mr. Satwalekar, a firm believer in long term planning and performance, suggested that the quarterly system of reporting financial performance may be flawed. While not being very useful to the small investors, it forces the CEOs to adopt strategies that focus on short term performance at the expense of long term stability, said Mr. Satwalekar. He also believes that these issues are just as prevalent and as a result fails to see the green shoots of recovery that are being hyped in the media. Mr. Satwalekar concluded by identifying the importance of long term planning in implementing a sustainable growth strategy in India and a need for leaders to return to basic principles of honesty and integrity, to move away from greed and hubris to simpler living and to go beyond self interest in the spirit of enlightened ethical behavior.

Dr. Ajit Ranade, Chief Economist at the Aditya Birla Group, tied the discussions together with a talk on managing risk. Focusing on the macro level first, Dr. Ranade discussed the prevalence of risk in the present economic environment faced with high volatility, high default rates, changing policy environments and the failure of rating agencies. He believed that while there may be some signs of recovery, the current economic environment is still far from being stable. He said that while we can criticize policies and practices leading to a risky environment, it is important to be able to anticipate, identify and understand their impact to effectively plan for these risks. Moving on to the micro level, Dr. Ranade identified the major sources of risk that a corporation may face. These included financial risk, credit risk, reputation risk and regulatory risk. He stressed the need for proper risk planning to be able to deal successfully with crisis. Closing with a parable on risk planning Dr. Ranade concluded that while corporations may not be able to remove risk, they have to be prepared to deal with it to survive.

Following the talks the speakers gathered for a lively discussion on the theme of the day "Survival". They touched on various issues including policy directions that governments need to take for sustainable recovery. The resulting discussion brought out the contrasts in current economic thinking with some panelists believing that policy makers in India need not worry about fiscal policy and focus on monetary policies, and others stressing that it was impossible to focus on one without affecting the other.

The discussion moved on to focus on the growth of the major economic powers in Asia - India and China. Here there emerged more consensuses within the group in terms of the advantage that China has in terms of growth over India. However the panel stressed that it was important to focus on the cooperation between the Southeast Asian nations to promote growth in the region. As Prof. Verma put it, while the Elephant may not overtake the Dragon, it will certainly dance with it.

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Contributed by -
M. Arun,
Coordinator,
Media Relations,
Confluence 2009,
Indian Institute of Management, Ahmedabad.

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