Managing RISK in MSME
Managing RISK in MSMEPresented at:RBI, College of Agricultural
Banking, Pune
Date: 10th April 2015OPENING QUOTE:
Organizations make money by taking risk and lose money by not
effectively managing risk.
WHAT IS RISK?Aprobabilityorthreatofdamage,injury,loss, or any
other negative occurrence that is caused by external or
internalvulnerabilities, and that may be avoided through
preventiveactions.
A risk is a potential problem it might happen and it might
not.
TYPES OF RISK:Credit Risk: The risk of loss arising from loan
default or unpaid account receivablesOperational Risk: The risk of
loss resulting from inadequate or failed policy, processes and
systems or from external events.Market Risk: The risk of loss
resulting from adverse movements in the market prices, interest
rate, equities, commodities, or currencies.Liquidity Risk: The risk
of loss to an entity arising from its inability to meet its
obligations as they fall due.
CAUSES FOR RISKS:INTERNAL FACTORS
EXTERNAL FACTORSFEW MAJOR PROBLEMS IN MSME FROM BORROWER
PERSPECTIVE:Difficulty in Getting Bank Finance.
Problems in Marketing of Products.
Lack of Latest Technology.
Lack of Professionalism
Collateral Problem
FEW MAJOR PROBLEMS IN MSME FROM BANK PERSPECTIVE:Understanding
the BorrowerTimely Sanction and DisbursementMonitoringMismanagement
and Missutlization of Funds FraudsRISK MANAGEMENT PROCESS:
RISKS FACING SMALL BUSINESSES:Form of businessLimited access to
fundingTough competitionLow collection in Account
ReceivablesLimited technical capacityPoor quality controlInadequate
margin
RISK MITIGATION:Proper counseling to MSME units.Financial
Literacy.Awareness about Govt. Schemes.Proper implementation of
Govt. Schemes.Easy access to Bank Finance.Practical approach for
each case.Technical Consultants.
CONCLUSION:Finally RISK can be managed by RISK:
R ReviewI Information GatheringS Study of Such InformationK Know
the causes/reasons for RISK and corrective measures to mitigate the
risk.THANK YOU
