Intrapreneurship and Risk Management With Dr. Rajeev Jaiswal, KPMG – IIT Kharagpur
Mr. Rajeev Jaiswal, Technical Director at KPMG, took time off to share his learnings and insights with the students of Vinod Gupta School of Management, IIT Kharagpur. Mr. Jaiswal began his discourse by asking us what it is that makes us proud of being a part of IIT Kharagpur. Upon hearing the students cite the institute’s rich culture, diversity and inter-departmental learnings in response, he went on to encourage us to work hard and contribute by adding value to the lives of one another, the institute and the country. Speaking from his life’s experiences, he said every task is like solving a problem with many alternatives. It is up to us to make the choices that are meaningful.
Having built his career in the financial sector and having moved recently to consulting at KPMG, he described the origin of the ‘Big 4’ and their evolution from audit firms to providers of advisory and strategic insights, ranging from government to infrastructure to IT consulting. He told the students that the need of the hour today is to act like an entrepreneur within one’s organisation and come up with ideas that upset the status quo, something that is termed as “Intrapreneurship.” He explained how life is all about trying. One may fail several times but the experience one derives from failure remains invaluable. What matters most for successful people is that they keep trying till they succeed. Such resilience is an unparalleled virtue. He urged the students to remain loyal to the work they pursue, regardless of the domain they choose to build their careers in, only then would they be able to build their expertise and a reputation for creating flawless solutions.
Next, he delved on the very important subject of Risk Management by citing the case of the Subprime Mortgage Crisis in the US in 2008. He elaborated on the concept of securitization, which is the pooling of various asset classes to create trade-able instruments. These can also be used to transfer the credit risk to other entities in certain cases of fraud and mismanagement, the effects of which were seen during the recession that ensued after the crisis in 2008. This caused a splurge in the number of bad loans as highly rated credit instruments which were primarily composed of risky bonds/funds started failing and borrower identities were lost in obscurity. He went on to explain how banks in the US and their inability to manage their liquidity risk went on to create one of the biggest financial disasters.
Moving to the methodology of how risk is calculated, Mr. Jaiswal told the students about the concept of VAR (Value at Risk) which is a statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame. He also told the students about a common risk parameter in banking institutions called Loss Given Default or LGD which is the share of an asset that is lost if a borrower defaults. These in turn define the level of uncertainty that is attached to an instrument like a loan or a fund.
On being asked how one can analyse the risks in situations that have not been experienced before, he briefed the students about the Monte Carlo Simulation. It is an interesting algorithm that uses repeated random sampling techniques to obtain numerical results to solve problems. His invaluable insights were much appreciated by the batch where many aspire to someday build their careers in financial markets, consulting and analytics, thus following the footsteps of the much accomplished Mr Rajeev Jaiswal himself. The session ended with a bevy of questions mostly concentrated in the financial markets and data analytics area.