The Hindu Business Line : ‘Salaries must be linked to the risks taken’

Mr G.N. Bajpai (left), Member, Advisory Board, MCX Stock Exchange, with Ms Chanda Kochhar, MD and CEO, ICICI Bank Ltd, and Mr U.K. Sinha, Chairman and Managing Director, UTI, at the CII’s Risk Management Summit in Mumbai on Tuesday.

Our Bureau

Mumbai, Aug. 18 Employee compensation should be aligned with the risk adjusted performance and not just on the short-term performance of employees, said participants in a risk management seminar organised by the Confederation of Indian Industry (CII).

Organisations need to align their incentive structure to ensure that the risk taken by the employees is also taken into account. The incentive structure should not induce an excess of risk taking, said Ms Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank.

Mr U.K. Sinha, Chairman, UTI, said employee compensation has to brought in line with the whole business, and not the just the short-term performance.

He also said that financial analysts get carried away by short-term performance rather than focusing on the long-term.

He said that due to UTI robust risk management mechanism they have managed to weather the financial crisis smoothly.

“As a fund house, we have not faced any redemption pressures and we are receiving reasonable inflows in our equity schemes,” he added.

Mr Nitin Bhatt, Partner at Ernst and Young, said India is at an embryonic stage. “Only about four out of the 30 Sensex companies have risk management committees in place,” he said.

Speaking about ICICI Bank’s plans, Ms Kochar said the bank will focus on home loans and car loans in the current fiscal.

“Our rates are competitive. It is important for customers to take into account the interest rates over the entire tenure of the loan rather than only the rate offered in the first year”, she said.

She also said it is too early to assess the impact of the erratic monsoons on GDP growth and credit offtake.

At present, it is difficult to quantify the impact of the monsoons on the agricultural growth rate and hence on GDP, she said.

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