Winter School 2020: Day 2 – Risk Literacy – Dr. Michelle McDowell, Research Scientist and Prof. Shyam Sunder

On 14th January 2020, TAPMI had the honour of hosting Dr. Michelle McDowell as a part of the 4th Winter School. Dr. McDowell is a research scientist at the Max Planck Institute for Human Development and the Harding Center for Risk Literacy. She shared her insights on the risk literacy challenges that we are currently facing. Risk is often required to be communicated in statistical measures but should be done keeping in mind the audience to whom it is being communicated.

Dr. McDowell stressed the importance of being transparent while sharing information especially in the case of reporting scientific data. She argued for using natural frequencies rather than conditional probabilities and discussed three ways to train people to use the priors. She took the example of the medical field and explained to the audience how the ability to correctly analyze, interpret and communicate statistical data is important, especially for the physicians.

A workshop was conducted to help the audience better understand the new ideas in risk literacy, where Dr. McDowell guided the participants on design considerations while presenting data. Participants learned how to use their creative and technical skills to present data in a transparent manner. The session ended with enthusiastic participants presenting their own ideas.

TAPMI also invited Prof. Shyam Sunder, from Yale University, who addressed the audience on “What we know about the human attitude towards risks”. Prof. Sunder is the James L. Frank Professor of Accounting, Economics, and Finance at the Yale School of Management and Professor in the Department of Economics. He started the session by first introducing two operationalized definitions of risks talked about the general concept of measuring risk and its limitations. Raising a subtle but deeper philosophical issue associated risk and uncertainty, Prof. Sunder explained that both of the concepts use general probability theory as a measure.  However, in the real world, most, if not all, events cannot be assigned probability values.

He proposed an alternative of moving away from dispersion-based measures of risk and lean towards loss/harm conceptualizations of risk. “We should seek an explanation in observable opportunity sets, instead of unobservable Bernoulli functions”, he concluded.

DISHA 2019: Day 4: Guest Lecture: “Disruptions and Learnings” by Mr. Vijay Wadhwani, Head SCM Logistics, Relaxo Footwears Limited

On 02^nd August 2019, Mr. Vijay Wadhwani, Head SCM Logistics, Relaxo Footwears Limited, conducted a Guest Lecture organized by TAPMI’s flagship program DISHA. He began the lecture by introducing the concept of disruptions in supply chain management.

Mr. Wadhwani provided valuable insights into the current scenario of supply chain management in the footwear industry. He emphasized the importance of assimilating the risks associated with the supply chain. A thorough understanding of the risks is essential as prevention of the same aids in achieving the organization’s targets.

He concluded the lecture by highlighting the significance of understanding customer requirements along with efficient supply chain management. “It is one of the key factors in the growth of an organization in dynamic markets said,” Mr. Wadhwani.

Disha 2019: Day 3: Guest Lecture: ‘Disruptions in mutual fund industries’ by Mr. Swarup Mohanty, CEO, Mirae Asset Global Investments (India) Pvt Ltd

On July 28, Mirae Asset Global Investments (India) CEO Mr. Swarup Mohanty addressed the TAPMI cohort as part of DISHA 2019. He opines that it is crucial to survive and weather the onslaught of disruptions in the financial services sector to be successful. Mr. Mohanty said that a mutual fund (MF) is a trust and is the only business which shifts the risk of investment back to the investor.

Mr. Mohanty briefly touched upon the journey of MFs in the country, and how the landscape has changed from 1993 (first MF regulations) to 2019. Change in communication, preference for branded MFs, increase in regulatory intervention, transition to digital and the growing demography have contributed to dramatic changes in the asset management business. From 2009 to 2016, regulators intervened by removing entry load for MF investors, changed distribution procedures and mandated MFs to perform complete disclosures. Thus, the present challenge for the industry will be to reduce the behavior gap between investor return and investment return.

Mr. Mohanty believes that it is vital to develop the ability of anticipation to tackle disruption. He concluded his lecture by saying, “Making money the right way will give you a kick. There is lots of money to be made. But you have to learn the path!”

DISHA 2019: Day 2: Career Counselling session by Mr. Mohan Ramaswamy, Co-Founder & Chief Executive Officer – Rubix Data Sciences Private Limited

On 27th July 2019, Mr. Mohan Ramaswamy, Co-Founder & Chief Executive Officer, Rubix Data Sciences Private Limited, conducted a career counseling session organized by TAPMI’s flagship program DISHA for the TAPMI cohort. Mr. Ramaswamy addressed queries and concerns raised by the students mostly regarding the importance and ability to make the right career choices, how and when to start one’s own business or enterprise, and the intricacies and opportunities related to careers in Risk Assessment.

Mr. Ramaswamy began the session by addressing a student’s question about how and when one must think of doing something of one’s own. He explained to them that in the initial period, one must resist the urge of diving into something new, gain enough experience, subject-knowledge, get an idea of how a business functions and what are its various challenges since “Business is sanity, but cash is a reality” said Mr. Ramaswamy. He emphasized the importance of facing challenges and failures not just in our professional lives but also in our personal lives because that is what will make us fearless and confident, which are the key factors to our individual and professional growth.

Mr. Ramaswamy then went on to talk about the elements required to be taken into consideration while picking a career path. He said, “Instinct is something your mind processes based on some prior information it has stored and something which comes to you by instinct must become your preference”. Mr. Ramaswamy concluded the session by answering other career-specific questions asked by the students by providing instances from his personal life and experiences

Winter School 2019: Day 4: “Knowing your Risk Literacy as an Educational Challenge” by Michelle McDowell, Research Scientist, Max Planck Institute for Human Development and Harding Center for Risk Literacy

On 17th January 2019, Michelle McDowell, Research Scientist at Max Planck Institute for Human Development and Harding Center for Risk Literacy addressed the cohort at Winter School 2019 at TAPMI on the topic- ‘Knowing your Risk Literacy as an Educational Challenge. The interactive session focused on statistical literacy and the importance of health claims, and enlightened the participants on the risk of statistical illiteracy.

Michelle initiated her session with a few examples to show that statistical illiteracy is a collective problem and statistical data is often difficult to understand. She unearthed the persistent problem of overdiagnosis and overtreatment of medical conditions, that primarily occurs due to lack of understanding of statistical data by medical practitioners and general public alike. This lack of clarity further causes overestimation of benefits derived from the medical interventions, that ultimately is at the heart of the problem.

Michelle then went on to explain that statistical illiteracy is created by non-transparent framing of information, such as the use of single-event probabilities, rather than absolute risks, the use of survival rates, rather than mortality rates and the use of relative risks rather than absolute risks.

She emphasized the importance of transparent risk communication and hence the teaching of statistical thinking and transparent representations in primary education. Michelle enthralled the audience with her knowledge and explanation. The session ended with a Q&A where she addressed the queries of the audience with expertise.

Bloomberg Olympiad || Day-2 || TAPMI BLOOMBERG OLYMPIAD FINALS

On 28^th October, 2018, in the final round of TAPMI Bloomberg Olympiad organised by the Finance forum of TAPMI, teams from IIM Bangalore, TAPMI Manipal, IMT Ghaziabad, SIBM Bangalore, N L Dalmia Institute of Management Mumbai, NISM Mumbai, presented a comprehensive overview of banking and NBFC giants in terms of housing finance sector.  The teams were evaluated based on how well they analysed the industry, investment, competitors and the risks the companies faced.

The team from IIM-Bangalore presented its analysis of HDFC Bank.  The team opined that HDFC’s initiatives in digital lending and mobile banking in rural areas have provided it an edge over its competitors.  Strong retail strategy and excellent asset quality have put HDFC in the lead in housing finance sector.  Risks in terms of consultation from only Indian firms, business and regulatory risks that could arise after the end of tenure of Mr. Aditya Puri (Managing Director, HDFC) are the major concerns that the team listed.

The trio from TAPMI Manipal presented its analysis on Manappuram Finance. Starting with sectoral analysis, the team shared its insights on external factors affecting the functioning and growth of the firm. In addition, the team elaborated on the liability profile, asset liability differential, loan tenure and the risks involved with investments at the Kerala based NBFC firm.

The team from NISM Mumbai chose to present the analysis of Indiabulls Housing Finance.  Healthy capital adequacy rating, low cost to income ratio and relatively less price-earnings ratio are the key features of the company.  Risks in terms of credit, liquidity, interest rate and operations are the major concerns, the team concluded.

With analysis of IndusInd Bank, team IMT Ghaziabad concluded that its fingerprint transactions, ‘video branch’, ‘cash on mobile’ features have resulted in strong credit growth and asset quality.  The team mentioned that credit risk, market risk and asset liability management risk need the company’s attention.

The team from N L Dalmia Institute of Management – Mumbai chose L&T Finance Holdings Ltd for presentation. It is an NBFC and a CIC registered under RBI. It has lending and non-lending branches. It is involved in the microloans business and is ROE focused.

The team from IIM-Bangalore emerged the winners and the team from TAPMI Manipal were declared the runners-up.  The esteemed judges commended the effort of the participants.  They applauded TAPMI and Finance Forum for putting up a splendid show with great attention to detail.

Disha 2018: Day 6: Guest Lecture: ‘Big Data, Small Data and the need for better Consumer Insights’ by Mr. Shashank Gaur, Head of Trade Marketing, The Kraft Heinz Company

On 1^st September 2018, Mr. Shashank Gaur, Head of Trade Marketing, The Kraft Heinz Company addressed the marketing cohort in an engaging discussion on “Big Data, Small Data and the need for Consumer Insights.” The discussion addressed the various nuances of Big Data and Small Data today, and how they can be a transforming factor in an organisation’s marketing strategy.

Mr. Shashank taught the students the “5-Step Model” to cracking the process of data collection and analysis and how to use these observations to drive products in the market. The steps in the process include gaining insights on device behaviour of consumer; devising the perfect modelling method (Predictive vs. Contemporary); gathering data on the ‘5 Whys’ of consumers; learning to navigate the internet; regarding speed over accuracy. The essence of the model was to gather and understand the data set, to get better insights on the consumers; at a speed that is competitive and is addressing issues that drive consumer behaviour.

He passionately talked about the evolution and the immensity of data in the world. “We live in a data rich world. Data is the future. We will never run out of data. Understanding and navigating data is crucial today”, he said. He also pointed out how it is a blessing in disguise, given the risk associated with it. Viral rumours, information asymmetry, data breach are issues the world is collectively facing. As we progress to a more data driven world, addressing these issues will also become important.

Mr. Shashank concluded the session by giving students insights with examples from within the industry, Amazon Go being one of them, and remarked that Data Skills are going to steer not just the discipline of marketing, but all disciplines within an organisation.

Disha 2018: Day 5: ‘Role of Treasury in Strategic Management’ – Mr. Bharat Gupta, VP – Model Validation Lead, Northern Trust Corp

On 31st August 2018, Mr Bharat Gupta, VP – Model Validation Lead, Northern Trust Corp delivered a guest lecture on the ‘Role of Treasury in Strategic Management’. He began by explaining how balance sheets and financial statements work. He mentioned that for a Treasurer, obtaining money or funds at a competitive price is the highest priority. “How easily one can get the required resources from the market is the test of the efficiency of a Treasurer”, he explained.

He elaborated that it is important to decide on means of funding, whether it is through Commercial Papers, Bonds or Deposits. He then went onto explain the Fund Transfer Policy. He explicated that the transfer pricing represents the price paid from one company to another for a product or service when both are owned and report to the same parent company. He added that the transfer pricing policy dictates the approach taken by the two companies when determining the price of a product or service.

Mr Gupta then spoke about the various challenges a Treasurer can face while raising funds for their company. He then outlined the concept of swaps and the effects of the interest rates on it. He emphasized that swap payments are notional, what gets exchanged are the interest payments and not the principal payments. He stressed that when interest rates are increasing, we convert the fixed rate assets into the floating rate assets.

Mr Gupta then spoke about the LIBOR scandal where the banks where rigging the interest rates. He alluded that LIBOR is going to be phased out and as an alternative to LIBOR, a new system, Secured Overnight Financing Rate (SOFR) is going to be implemented. He clarified that SOFR is based on transactions in the Treasury repurchase market, where banks and investors borrow or loan from Treasuries overnight. In the United States, he cited, this work is being led by the Alternative Reference Rates Committee (ARRC), which comprises of major over-the-counter (OTC) derivatives market participants as well as regulatory bodies.

He explained the different types of Options and moved on to the determination of Options Premiums. Using the example of the Black-Scholes Model of Options Pricing, he discussed, how Options are priced. He then commented on the Monte Carlo Simulations (MCS) and how for the American Options, this model of simulations cannot be used. He advised that instead of MCS, Geometric Brownian Motion is followed in Black Scholes process to determine prices of American Options.

Mr Gupta finally spoke about Stress Testing which is the ability of a bank to rebound from the downgrading of loans or losses thereby clarifying which banks lose their capital.

Guest Lecture Series: Mr. Gautam Mishra, Regional Head, Cremica Food Industries Ltd.

On March 20th, 2018, TAPMI was graced with the presence of Mr. Gautam Mishra, Regional Head at Cremica Food Industries Ltd. He addressed a cohort of students on the growing marketing trends and changes happening in the FMCG sector.

He began with an overview of the industry explaining how there are nearly 8.4 million retail outlets in the country out of which 2.3 million outlets dealing in FMCG products contribute to almost 80% of the sales. He also emphasized the importance of distribution and the importance of both quality and quantity of distribution to be taken into consideration for optimal decisions.

He also highlighted facts about the contribution of the rural and the urban markets in FMCG sales. He talked about the different A’s of rural marketing namely, Availability, affordability, acceptability, and awareness, and also discussed how marketing strategies directed at rural markets were different with respect to communication mediums, transport facilities, electrification, etc.

Mr. Mishra then spoke about the premium rush and how Premium was the mass and super-premium the new premium in India today.

He emphasized three core values: integrity, speed and personal ownership that are necessary for each one of us to inculcate in ourselves to be successful in the future. These would help us to self-articulate our thoughts. He also listed four leadership skill sets that we should possess. They were thought leadership, people leadership, action leadership and result leadership.

Mr. Mishra then mapped out his journey from working in Onida, Perfetti van Melle, Britannia and others to Cremica currently and how he added value to each of these organizations through his hard work and strategies. He discussed his initiatives in areas of distribution, value chain, sales, etc, that helped them grow and become more efficient. Overall it was a wonderful learning experience for all of us and we took great insights into the FMCG sector and the career path that can be taken in this area ahead.

Manthan 2017: Day 2: Guest Lecture 3: “Credit Rating Perspective”- Mr. Shaik Mohammed Haneef, Deputy Manager Business Development, ICRA.

Mr. Shaik Mohammed Haneef from ICRA enlightened the students about the various types of credit ratings and how it is evaluated from the point of view of ICRA in his session on ‘Credit Rating Perspective’. He stated that ICRA majorly evaluates and provides credit ratings and non-credit ratings which are used by clients for understanding a corporate’s credit state.

He elaborated and explained on various credit ratings such as SME Rating, bank loans, infrastructure projects, and commercial papers. He also put some light on non-credit ratings such as real estate grading, solar grading, ESCO (Energy Services Company) grading which is used to understand energy efficiency, and vendor rating.

Mr. Haneef further elaborated on the four different sources of risk such as industry risk, business risk, financial risk, and management risk. He later gave a practical understanding of the risks to the students through the ICRA website followed by answering some intuitive questions by the students on the same.