Must Never Lose Sight Of Risk & Crisis Management

Being prudent, adhering to strong governance practices and focusing on long-term growth are critical

- Keki Mistry

We are living in an interconnected world with an interdependency which is going to get stronger in the coming years.

Leaps in technology, rising influence of social media, access to information at click of a button, progress in transport infrastructure and investors searching for profits beyond their territorial boundaries are some of the factors that have led to the majority of the economies converging into a synergetic marketplace.

However, recent history has shown that with these strong financial and economic linkages, we have to be prepared for the unexpected. Over the past 12-13 years, the world has seen several crisis situations that have shaken the foundation of long-held beliefs.

India has in recent years endured several crisis situations such as the global financial crisis of 2008-09, the US Fed’s Taper Tantrum in 2013 and the IL&FS default in late 2018. The frequency at which these crisis situations have occurred has thrown forth its own set of unique challenges. Making predictions is proving to be impossible. Mathematical and statistical models have their own limitations. The common theme in past global economic instabilities was lure of greed and blatant disregard for ethical behaviour and good governance.

I personally never imagined in my wildest dreams that a health crisis, and not a financial crisis, would be the cause of such an economic catastrophe. Moreover, the sheer scale and speed of the unfolding human tragedy was overwhelming. The pandemic has affected the global economy by causing both aggregate supply and demand shocks. It reminds me of the term, ‘butterfly effect’, where a small change can affect the entire ecosystem.