Aerospace & defence sector saw the most improvement in risk resilience in 2022 – Corporate India Risk Index

• There has been an improvement in the risk index score from 62 in 2021 to 63 in 2022, with a higher score indicating superior risk management.
• The aerospace and defence sector demonstrated the most significant improvement in the risk index, with its score rising from 52 in 2021 to 63 in 2022.
• Sectors like tourism and hospitality, and transportation and logistics handled the disruptions arising from fuel price hikes and terrorism effectively.

Although corporations have faced challenges such as increasing inflation, slower global growth, elevated commodity prices and tighter global monetary policies, they have shown resilience through effective risk management strategies. This resilience is reflected in an improvement in corporate India’s risk index score to 63 in 2022 from 62 in 2021, as measured by Corporate India Risk Index (CIRI) 2022, a study conducted by ICICI Lombard in collaboration with Frost & Sullivan.

A higher score on the index indicates superior risk management, allowing businesses to implement efficient risk-management protocols.

Says Bhargav Dasgupta, managing director and chief executive officer, ICICI Lombard, "The enhanced score in the 3rd edition of the Corporate Risk Index is a testament to the efficient risk management practices adopted by Indian corporates in the face of global headwinds and challenges. As we move forward, it is crucial for companies to stay ahead of the curve and adopt comprehensive and efficient risk management practices."

All twenty sectors of the Indian economy are categorised as either 'superior' or 'optimal risk handling,' with 7 sectors exhibiting 'superior' risk management practices. These sectors include automotive, fast-moving consumer goods (FMCG), tourism, healthcare, telecom, pharmaceuticals, and new-age businesses.

The 'Aerospace and Defence' sector demonstrated the most significant improvement in the risk index, with its score rising from 52 in 2021 to 63 in 2022, driven by initiatives from both the government and enterprises. Even conventional industries are now gearing up for technological risks like cyber threats and innovation risks.

Sectors like tourism and hospitality, and transportation and logistics handled the disruptions arising from fuel price hikes and terrorism effectively. However, the metals and mining, and chemical and petrochemical sectors experienced a decline in their risk management scores, attributable to external macro-economic factors.

Rising risk index indicates better risk management among Indian companies

Says Aroop Zutshi, global president, Frost and Sullivan, “Strength of India’s story lies in the fact that Corporate India Risk Index score is steadily improving year-on-year, we are seeing a larger number of sectors moving towards a better Risk Index such as telecom and communication, aerospace and defence, and education and skill development.”

The third edition of Corporate India Risk Index 2022 encompasses 32 risk factors categorised into 6 main dimensions and is based on international risk management standards. Corporate risk encompasses various aspects of a business, including customer-related risks, competition-related risks, regulatory risks, risks associated with business operations, technology risks, financial risks, environmental risks, and more.

In addition to assessing the performance of businesses on the Corporate India Risk Index, the study offers suggestions to minimise risk and achieve a higher score on the ‘Superior Risk Index in 2023’. These recommendations include anticipating risk through scenario planning, taking a comprehensive approach to de-risking, and leveraging predictive analysis to obtain actionable insights.