MANTHAN 2017: DAY 1: Inaugural Ceremony

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The inauguration ceremony of Manthan 2017, the annual budget conclave of T. A. Pai Management Institute, Manipal was held today. The theme for this year’s event is “Evaluate Empower Exceed”. It started off with an insightful address to students by the Director-in-chief, Prof. Gururaj Kidiyoor and was followed by an informative speech by Prof. Madhu Veeraraghavan. He spoke about the TAPMI Finance Lab and the intent behind establishing it. It was started in the year 2013 and was established with a vision to position TAPMI as a leader in Banking and Finance education in the country. This goal is continuously pursued by training students in real time trading and investments in one of the finest finance labs in India today.

TAPMI has always strived hard to make its finance courses industry relevant and SMIC is one such course. Students today are neither interested in learning only theories, nor they want to limit themselves to writing papers and journals. They want real world experiences and this is explicitly the reason why SMIC was introduced as a course. SMIC is a course specially designed for students to train them in the art of investment. Students learn the fundamentals of trading and are provided real money for investing. This differentiates TAPMI from other colleges where trading happens only through simulations and lack real-time experience. With the vision to bridge the gap between theory and practice, SMIC provides hands-on experience to the students for growing and developing to become successful investors.

The ceremony was followed by the SMIC presentations. It was indeed an extremely proud day for TAPMI to celebrate and demonstrate excellence through the 11 teams who worked really hard for days and presented their portfolios before the industry experts.  The teams comprised of both PGDM and BKFS students. The students got an opportunity to act as real-world investors and present their investment ideas before industry experts. The judges reviewed each team’s work and provided suggestions after finding out weak areas in each plan. The feedback from the judges was a great value addition for the teams and helped them identify areas of improvement.

Day 6: ‘Information Representation: Improving Bayesian Reasoning’- Dr. Michelle McDowell, Research Scientist, Max Planck Institute of Human Development, Germany

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The major takeaway from the lecture titled “Public Understanding of risk: An educational challenge” was that easy and transparent information saves lives. The talk focused on how to represent risks so that people can understand it and make rational decisions. Statistical illiteracy is found to be a collective problem which has major health implications and is commonly observed in patients, journalists and physicians. It basically results from non-transparent framing of information due to cognitive biases, nature of doctor-patient relationship and conflict of interest. The patient’s understanding of risk is found to be low because they fail to ask questions from physicians. Statistical illiteracy can be improved with the better and transparent representation of information which can reduce relative risks. She recommends usage of frequency statements instead of single event probabilities and absolute risks instead of relative risks as it makes understanding more easy and sensible.

Bounded Rationality, Day-4: ‘The Role of Empathy in Altruistic Behaviour: Evidence from Sequential Dictator Games’ – Prof.Sujoy Chakravarty, Professor (Economics), Jawaharlal Nehru University

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Prof. Sujoy Chakravarty, Professor of Economics at Jawaharlal Nehru University spoke about “The role of empathy in altruistic behaviour: Evidence from sequential dictator games.” He said that economics is a field that isn’t hijacked by crazy people, it is what we have. Even when a lot of things seem. To introduce the topic he differentiated between selfish and non-selfish motive. When it comes to warm glow or altruism, these are non-selfish behaviour. Whereas, reciprocity is a selfish behaviour but indirect reciprocity is more dependent on empathy and could be fuelled by empathy.

Prof. Chakravarty jokingly remarked that reciprocity is the oil that greases the wheel of capitalism. The concept specifies that an individual will be generous to another individual only when that individual has been good to him before. He talks about three types of reciprocity: downwards, upwards and indirect. He explained that in downstream reciprocity, “B helps A, C observes B. as a result C is more generous to B.” Whereas, in upstream reciprocity, “A helps B. B is more generous to C if has been generous to B.” But according to him, indirect reciprocity functions differently, it leads to an individual helping another one who has not interacted with him nor is there a chance of interacting with him in the future. According to Prof. Chakravarty, in indirect reciprocity “A helps B, this observed by C.  C will behave generously with B if A hasn’t.” In this case B gets two chances to play this game. C’s action will act as a compensation for A’s action.

Prof. Chakravarty has conducted his research on a large sample. He told the audience about the methodology of the study and how he has come to the conclusion of his research. He said the control conditions are empathy, randomness and information. His work is still underway and he said that he is still finding faults in his own research and trying to tease out other alternatives. He welcomed the audience to critique his work. It was an enriching and learning experience to go through the entire process o how the research is growing.

Bounded Rationality: “Introduction and Heuristics in Decision Making”, Professor Gerd Gigerenzer, Director, Max Planck Institute for Human Development; Director, Harding Center for Risk Literacy in Berlin

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On the 9th of January, T. A. Pai Management Institute was honoured to have Professor Gerd Gigerenzer, Director at the Max Planck Institute for Human Development and Director of the Harding Center for Risk Literacy in Berlin to give a lecture on Bounded Rationality. His work is renowned globally and participants and students got to hear about his work directly from Prof. Gerd.

He said that if one looks into a book on rational decision-making, good decisions follow logic and their goal is to maximize utility. Although he says it is a beautiful theory, it does not truly capture the essence of how we make decisions. Prof. Gerd’s main objective is to dispel the darkness in which much of our decision theory is based on. Simple heuristics that make us smart because it gives us the basics, and alternatives to think while making a decision.

There are times when we do not know what the consequences of a decision will be. These uncertainties according to Prof. Gerd are mainly when the situation is regarding whom to trust, where to invest and whom to marry. When the consequences of our decision is unknown, rationality cannot be counted as a factor for decision-making. This is when heuristics is used to evaluate our decision making. Optimisation may be a very good model but it gives us the illusion of certainty, thus heuristics is not a second choice.

Prof. Gerd spoke about ecological intuition and toolbox method of thinking as a part of heuristics. He even introduced a concept called Hiatus Heuristics. These concepts and theories were broken down for our convenience and delivered with high simplicity. It was an enriching experience to be sitting in the audience and watch such complex ideas delivered so simply

 

 

“Digitization in Finance” – Mr. Rahul Malhotra, CFO and Vice President, BFSI Vertical, Genpact.

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In an informative session with students, Mr. Rahul spoke about how drastically the expectations from finance have changed in the recent past and how digitization has played a major role in achieving this. Today every facet of the industry is being impacted by word Digital. Digital is commonly confused with technology but it comprises of much more. It is how a firm’s function, processes and structure is being transformed. “Digital is coming up with ideas to make the work you are doing more refined, organised and simple”, he said.

He spoke about how everything today from organization’s processes and basic foundations to the structure is being automated resulting in a completely digitally driven business. Companies are eager to implement new ideas and things are changing so fast that you can never apply the same concepts. Therefore it is very important for us to quickly adapt to this change.

Digitization can mean different things to different organizations at different times. With numerous technological changes happening, an organization will get confused if it doesn’t have a clear line of vision on what it wants to achieve. Digitization has to be driven precisely by the need and vision of the organization.

Moving further, he talked about the importance of human touch while digitizing. Firms in the aim to digitize are removing the human factor completely. An example of this is how Neural Chat is being worked upon as an experiment by banks to change customer experience completely. In an era, where everything is being automated and robots are taking over, firms must realise that the human factor is still important to deliver customer experience. Digitization is of no use if it doesn’t translate to superior customer experience. The main aim of any business is to make the customer happy. You may have the best system, processes but it will not work if the customer is not happy with the services you provide.

Companies also need to ensure that their front end and back end are streamlined and work hand in hand. Today companies are trying to be objective and use analytics and science in every process. A firm’s customer interaction might be superior but if your backend is weak the process will fall apart.

Moving on he spoke about how Digitization is impacting three broad areas of any business: customer service, operational processes and business model. He talked about how Genpact is helping its clients with their strategy that can help them impart the customer experience and type of operational processes they desire.

He concluded by telling how the world is changing to a digital world which reduces jobs but increases capacity. Today, expectations and roles of Finance in an organization have completely changed. Finance has a role in every major decision of the firm irrespective of the department. The main reason which has led to this change is that with the amount of data available, you need tools such as predictive analytics and forecasting for taking a decision and that requires the help of Finance.

FINOMENAL 2016: DAY 2:”CAREERS IN FRM”-Mr. Lalit Taneja, Regional Director, Global Association of Risk Professionals

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In an interactive session with students Mr. Lalit Taneja, Regional Director, Global Association of  Risk Professionals gave the students insights about the various career prospects in the field of Financial Risk Management. The session started off with him telling the students about the key forces driving the demand for risk managers. Before 2008 financial crisis market was driven by sales then post the crisis operations took over and presently the focus has completely shifted to regulation. This demand is the result of many historical drivers some of which are globalisation and integration of markets, increased product complexity, technological advances, regulations and market crisis. Sovereign risk, commodity market volatility, increased focus on organizational risk are some of the factors that have recently further accelerated the demand for risk managers.

He further stated why people are increasingly shifting to jobs in the field of FRM. Financial Risk Management assesses an individual’s ability to measure and manage risk in a real-world environment. What sets FRM apart is reliability, maintenance, validity, and acceptance. In the recent years, new trends have been constantly emerging in FRM. Due to current issues like cyber risk, liquidity risk, and regulatory stress, FRM has become a prerequisite for every organisation. GARP plays an active role in monitoring the work of certified FMR practitioners.

As the session approached its end, he concluded by stating some of the latest trends shaping the role of risk management which includes regulations, technology, advanced analytics and the emergence of newly arrived risks such as model risk, cyber security risk, and contagious risk. With these emerging trends, companies are gearing up to tackle these risks. Organisations are imparting risk education to their employees and are encouraging them to learn by providing benefits like exam preparation leaves, study groups in office and in-house course instructor.

FINOMENAL 2016: Day 2: ECHO- Panel Discussion- “Impact of Increasing Risks and Regulations in the financial industry”

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Mr. Sandeep Hosurkar, VP at IL and FS, Renewable Energies

Mr. Sandeep Hosurkar, VP at IL and FS, Renewable Energies, started the panel discussion by stating that risk and returns move together rather than the usual norms wherein we tend to look for more returns and ignore risks across all the markets. He said that risk and regulation has come back into predominance and that domestic banking portfolio has seen challenges on asset quality of many banks and financial systems. He further quoted that “Asset development play important role in financial markets”. He elaborated the importance of asset reconstruction companies (ARC) by stating how banking structure is undergoing a change. He concluded by classifying Indian banking into new age banks that capture higher margin and structure a deal so as to sell the assets down to other banks and old banks that maintain a lend and hold strategy.

Mr. Tamal Bandyopadhyay, Advisor on Strategy on Bandhan Bank and consulting editor of Mint

Mr. Tamal Bandyopadhyay, Advisor on Strategy on Bandhan Bank and consulting editor of Mint, stated that being a non-banker on the panel, started off by classifying banks into two categories- small financial banks, which do everything that a universal bank does and payment banks- that transfer money for migratory labors. The small banks have a maximum of 1 Lakh deposit, wherein 75% would be in zero risk government bonds whereas the rest are deposited in other banks. They are restricted by 15% capital adequacy ratio (CAR) set by RBI, which means a lot of capital set aside for risk, as compared to Bandhan and IDFC banks of 13% CAR. He emphasized that for payment banks, the bigger risk is operational risk. He stated “Biggest risk to banking sector comes from people and technology”. He elaborated that there is a need to have the right kind of people and technology which is rightly depicted, as the microfinance firms which convert to banks have a problem of managing people. He stated that many Indians either understand technology or banking, but only a limited understand both. He concluded that all banks should have a ground approach for finding risks and mitigating them.

Gaurang Trivedi, Senior Investment & Management Consultant

Mr. Trivedi started the discussion by quoting that “Regulations lead to reforms.” He stated that currently, the regulators are looking forward to principle-based regulations and to get more people under the regulations and acts. New investors are emerging and a number of companies provide markets for these investors. Thus, it becomes important for regulators to come up with cost-benefit analysis.

Harsha Upadhyaya, Chief Investment Officer of Equity and Fund Manager at Kotak Mahindra Asset Management Company Limited.

Mr. Upadhyaya started off by stating that in 1996 Mutual Fund Regulation was only 10% of what it is today which shows market has evolved tremendously. But with this evolution of the market, we are posed with humongous risks as well. There have been various credit issues in the recent past due to the same such as the asset management issue. Keeping in mind such volatilities and intricacies, SEBI has come up with new rules like the one that states that you cannot hold more that 12% of the assets. Mr. Upadhyaya concluded by mentioning that there is tremendous growth in mutual fund industry.

Bharat Gupta, 2nd Vice President (Team Lead), Model Risk Management at Northern Trust Corporation

Mr. Bharat Gupta began the discussion by telling how US banks have progressed since the 2008 financial crisis. In 2016, the capital level of the top 33 US banks has increased by a high margin. The main concern in the US is of low-interest rates.  If interest is low yield, it can never attain high values. As a consequence, banks are struggling with maintaining their capital levels. He also talked about how risks cannot be quantified. Risks keep cropping up but along with these risks, there are also opportunities. With augmented levels of risks and regulations and banks reworking on their model, there are opportunities for a B-school graduate in fields like risk management, model validation, and compliance management. He concluded by saying that the world is becoming a difficult place due to low-interest rates and cost pressures.