Maximizing opportunities and Managing Risks in digital era – A conversation with Shalinee, CRO, Godrej Capital
The financial industry is witnessing a significant transformation due to digital technologies, particularly in credit risk management. Godrej Capital is at the forefront of this change, recognizing the importance of digital innovation in enhancing risk mitigation strategies, The company adapts its credit risk strategies to changes in macroeconomic conditions by diversifying portfolios, conducting stress tests, and analysing various economic scenarios. Read more about this detail in an interview with Shalinee Mimani, Chief Risk Officer at Godrej Capital
- How do you see digital transformation influencing credit risk management in the financial industry, and what specific steps Godrej Capital has taken to incorporate digital technologies to mitigate risks?
Digital transformation is reshaping the landscape of credit risk management in the financial industry. At Godrej Capital, we recognize the pivotal role it plays in enhancing risk mitigation strategies. To incorporate digital technologies effectively, we have invested significantly in establishing a robust data infrastructure. With our business partnerships, we have also developed a state-of-the-art data warehouse and data mart, which serves as our golden data source, facilitating faster insights, automated reporting, bureau analytics capabilities, and risk metrics tracking.
Furthermore, we leverage Machine Learning (ML) to develop advanced scorecards and risk management models. These ML-driven models enable us to analyse vast volumes of data with precision, identifying patterns and trends that traditional methods may overlook.
- Given your role as a Chief Risk Officer, how do you envision the integration of AI technologies in credit risk modelling at Godrej Capital?
The integration of AI technologies will act as a transformative force in credit risk modelling at Godrej Capital. AI-driven algorithms hold the potential to revolutionize risk assessment by offering deeper insights into borrower behaviour and creditworthiness. Through AI, we can develop more accurate predictive models that factor in a multitude of variables, including economic indicators, customer behaviour patterns, and market dynamics.
At Godrej Capital, we plan to leverage AI technologies for enhancing the precision and agility of our risk management practices, enabling us to make informed decisions in dynamic market environments.
- How do you use analytics in overall business management and how does it affect Godrej Capital risk model?
Analytics plays a very important role in Godrej Capital’s overall business management and risk modelling systems. We rely on a comprehensive set of metrics to evaluate the success of our risk management program. These metrics include:
- Risk appetite measured through cost of risk: We regularly assess our risk appetite to ensure alignment with our business objectives and financial performance.
- Key risk indicators (KRIs): Utilizing KRIs, we monitor potential risks across our operations, enabling early detection and mitigation.
- Forecasting models: We develop forecasting models using analytics tools.
- Portfolio analysis: We analyse past data to make informed decisions, we stress-test our portfolio regularly to maintain a balanced risk profile across customer segments.
- Can you discuss how changes in macroeconomic conditions may influence borrower behavior and how Godrej Capital adapts its credit risk strategies accordingly?
Macroeconomic conditions like inflation rates, global economic growth, geopolitical circumstances, among others, can significantly influence borrower behaviour and credit risk dynamics. At Godrej Capital, we adopt a proactive approach to alter our credit risk strategies with time. We continuously monitor macroeconomic indicators and market trends to anticipate shifts in the borrower behavior and mitigate associated risks with our targeted customer segment. Our risk governance strategies focus on:
- Portfolio diversification: We diversify our loan portfolios to mitigate concentration risks and buffer against economic fluctuations.
- Stress testing: We conduct rigorous stress tests to assess the resilience of our portfolios under adverse economic scenarios.
- Scenario analysis: We analyse various economic scenarios to understand their potential impact on borrower repayment capabilities and loan performance.
By embracing these risk governance strategies, we ensure the resilience and sustainability of our lending operations in dynamic economic environments.
- What are some various types of risk governance strategies and best practices NBFCs should adopt to ensure smooth business functioning?
To address risk comprehensively, the Risk Management Committee (RMC) evaluates overall risks, including liquidity risk, ensuring sustainability. We adhere to the Asset-Liability Management (ALM) framework mandated by the Reserve Bank of India (RBI) to manage liquidity effectively. Additionally, we prioritize long-term viability, balancing spreads, profitability, and sustainability to ensure our lending practices remain profitable and resilient.
Moreover, as a digital-first company, Godrej Capital pioneers innovative lending initiatives like e-sign loan agreements, eNACH mandates, among others. We recognize that innovation introduces inherent risks, prompting us to implement robust risk mitigation systems. Each feature is designed to enhance user experience while aligning with our risk management objectives.
Our initiatives ensure end-to-end digital processing of loans while upholding necessary safeguards. Our dedication to leveraging technology underscores our commitment to providing accessible, affordable, and inclusive financial solutions. Through a combination of digital innovation and robust risk management, we remain focused on delivering value to our stakeholders while advancing financial accessibility and inclusion across our customer base.
