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Friday, August 17, 2007

Risk and the Elephant

Today's Economic Times (of India) carries an article by Sanjeev Sharma entitled 'Global capital market aversion may slow down India growth story':

“In the event of a sharp risk aversion in the global financial markets and a global hard landing, India’s growth cycle is far more vulnerable than the rest of Asia(.)”

The Wikipedia entry for Risk Management includes the following explanation:

Intangible risk management identifies a new type of risk - a risk that has a 100% probability of occurring but is ignored by the organization due to a lack of identification ability. For example, when deficient knowledge is applied to a situation, a knowledge risk materialises (sic). Relationship risk appears when ineffective collaboration occurs. Process-engagement risk may be an issue when ineffective operational procedures are applied. These risks directly reduce the productivity of knowledge workers, decrease cost effectiveness, profitability, service, quality, reputation, brand value, and earnings quality. Intangible risk management allows risk management to create immediate value from the identification and reduction of risks that reduce productivity.” (emphasis added)

Following up on my post below from 15 August (lead paint in Chinese-manufactured toys) it seems very clear to me all the above risks are quite high in Hyderabad in the BPO industry (Business Process Outsourcing – that is, laying off your helpdesk and accounts payable departments in the U.S. and hiring people in India to do the work). Costs are rapidly rising for BPO work here as well, which is already cutting into the profit to be gained by sending work over.

If there were major scandals, or several reports of ineffective and/or low-quality work coming out of off-shored India knowledge businesses, there could be a severe impact on the economy here in Hyderabad.

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