Liquidity for MSME Sector Key Behind Revival of Economy, Says BCT Digital CEO Jaya Vaidhyanathan

What is risk management and how can it help firms during the current times?

Active risk management is the need of the hour in the current economy. Risk management is not overall a spend area but one with a payback. If you take any annual statement of a particular company there is a section which says why we didn’t do well in a particular period. So when you say we didn’t do as well as expected, that’s an expected response but I want to know how you are you going to do going forward. So that comes from, for example, quantification of your loss. Whether that was due to demand and how can you attribute that to COVID-19 is the first part and the second part is how much can you attribute it to that. There is much noise about the vaccine been found but people are still unsure whether it will be found in October, December or March. Each of these scenarios will have different loss numbers and different recovery numbers as well. For examples active credit loss at 80% will put you at level A and 50% will put you at level B, so this is also modelling of different scenarios. Therefore, if vaccine is found in December, or if it is found in March, it will have different data. So different kind of scenarios are active modelling and this is no gut feeling, there is science behind it. It’s more about looking at past data and saying if this scenario happens, it’s more about quantification techniques, it’s more about predictive modelling. And saying what your loss could be and what part of it can be attributed to COVID and what’s your recovery going to be like.

What is your current outlook for the economy and how do you think industries can plan to revive after the pandemic?

My outlook towards the economy, more specifically towards India, is one of cautious optimism. Demand is going to take some time but it will come back. According to me, it is going to be a ‘v’ curve like a hockey stick like uptick. Demand that you see as of now according to me is held tight, it is going to return as long as we concentrate on a few things. One of them is that we need to keep an eye on the employment rate and that is not going to come only by private spending, there has to be a large scale government spending as well. All major economies around the world are based on government spending. For now, we need to forget fiscal deficit and concentrate only on large infrastructure projects. And the government is doing well on this front. Liquidity as such is not a problem, access to liquidity for certain sectors needs to be further looked into. Liquidity for MSMEs is a problem for now. Banks are not willing to lend because of NPAs. If these sectors are catered to, in terms of liquidity, then revival of the economy can be faster.