Abhijit Sen

A culture of governance accountability and responsibility goes much beyond mere compliance with rules and regulations. One has to transcend beyond the written word and imbibe the spirit of the written word and translate these percepts to a culture that pervades over every tenet of behavior. While accountability and responsibility have a reciprocal relationship inasmuch as one is the converse of the other, governance constitutes the framework that binds all of this together into an organic and vibrant existence that is behind every thought action and deed of the organization. Rules and regulations find their place in the compendium that may be in the reference domains of various regulators. An organization achieves the right standards of governance if these are instilled in the code of behavior of every member of the organization and it is that code that creates the accountability to a framework and the responsibility of each member to adhere to it. It is important to appreciate that culture is organic whereas any compendium of regulations et al is mechanical in the ultimate analysis.

One of the greatest facets of the evolution of my learning and maturity is the development of an understanding of risk. This has been the result of an exposure to multiple organizations, their business exposure to various elements of risk as well as their specific vulnerability to environmental, economic, business and reputational risks, how it shapes their strategies to mitigate the same. This has resulted in the development of an understanding of the most optimal approach to risk taking including identifying the various types of risks and evaluating the magnitude and potential impact of these risks on an enterprise’s operations. I have accordingly understood that a thoughtful approach to risk taking is underscored by developing a comprehensive risk management framework enshrined in policies and procedures for risk identification assessment, monitoring and mitigation. Emerging from this assessment is an approach that develops the company’s risk profile under various scenarios and their mitigation as opposed to an approach that does not take into account these various elements that goes to undermine the overall effectiveness of the risk management framework. It follows as a corollary to all of this that an organization that is completely risk averse actually fails to exploit its business opportunities leaving a lot of money on the table and impairing the economic return to shareholders.

In our lives we often encounter situations where there is bad news and the same has to be communicated. I have learnt that the worst approach is to suppress the news, which is not an option. When something like this happens, one has to agree on a cogent communication strategy that is inclusive to all stakeholders calibrating the extent of disclosure appropriate to the audience. The communication should include salient details of the incident, an analysis of the developments that led to this incident based on all available facts and a commitment to come back with further updates as more fact patterns emerge. As required by the regulatory framework, there should be a communication to regulators, and exchanges. Much is achieved by the tone of the communication, factual yet constructive and concise but not obtuse or attempting concealment or suppression. A constructive communication underlines remedial steps being contemplated, impact on customers and steps being taken to prevent recurrence. In my life I have encountered several such situations, viz. performance below expectations to a significant customer fraud compromising the organization’s reputation, customer loyalty, market and regulatory standing. Delivering this message in the right tone to each constituency, acknowledging failure but proceeding to a sharp analysis of events and failure in systems contributing to the same and steps to prevent recurrence as well as recompense losses of those affected was a very deep learning experience, more than what many successes taught me.

A situation that has stayed with me is a regulatory order served on a microfinance company on whose Board I served to temporarily cease and desist operations. This outcome was as a result of a perceived behavior whereby there was inadequate policy on pricing of products and insensitivity in collection practices. This choking of the company’s lifeline had a potentially debilitating impact on the solvency of the organization. The local team was not fully equipped to deal with this situation and therefore I felt that the best approach would be for me to go beyond the call of duty as a director to assist management in developing a multi-dimensional action plan to cope with the situation. It started with taking stock of the situation through a root-cause analysis of the problem understanding the points that created this regulatory perception and developing a granular action plan involving risk, business, finance, IT and Compliance. The action plan was monitored very closely and the effort resulted in the development of a remediation plan to the satisfaction of the regulators that eventually led to the lifting of the order. A concomitant part of the effort was a cogent communication plan with regulators in an open and constructive manner keeping them transparently apprised of the stagewise progress. Equally important was the assimilation of learnings from the episode.

This to my mind does not bear any elaboration as this is an inevitable part of the responsibilities of a leader to balance short term and long-term objectives. The attainment of the longer-term objective often happens through accretion of short-term targets but there is also the question of strategic choices that imply some compromises in short term profitability as resources have to be diverted for creating the foundation of the longer-term plan. This is a choice that is an essential part of the operating ethos of a company and is fundamental to building a credible and resilient institution as certain business initiatives may have a longer payback period. The fructification of these initiatives is often as critical to long term sustenance even by diverting some resources from attainment of short-term objectives.

In my assessment the one quality which actually creates trust in a leader is the realization and faith that the leader will stand by his team irrespective of the outcome of a decision. In typical organizational dynamics, decisions are taken based on the best available data set and this may meet different degrees of reliability and also be subject to underlying assumptions. Typically, these are discussed collaboratively and then the leader takes some calls based on best available information. The team then executes and some plans fructify and some go awry. The best leader is one who passes on the glory of his successes to the team but stands up for failures without pinpointing responsibility to others especially externally. In internal meetings of course there is room for post mortem to learn from mistakes but to the outside world, a leader who stands steadfast behind his team earns the maximum extent of respect and cooperation. This inculcates a culture in the team to give of their best knowing that the leader will not be unreasonable and this elevates the quality of team-spirit and participation manifold.

As I transitioned from being an executive responsible for running a function to providing oversight and independent judgment at board level, there were several subtle shifts which took me some time to understand and appreciate. As an executive one exercises direct authority and has direct access to information including all the building blocks that go behind it as well as being associated with the process as they take shape. As a Board member, one has authority but it is of a surrogate and vicarious nature, exercised indirectly by respect and influence. One has access to information with limited lead time and detail and it often comes in a preformatted form, whereby one can seek additional detail but within limitations. Therefore, one has to develop several skills, notably the ability to understand the data that is presented and ask incisive questions that underscore the depth and breadth of understanding, connect dots and elicit responses that complement the gap. Equally through this process one develops bridges of credibility. Also, by demonstrating a degree of maturity and acumen bred out of years of experience in multiple situations, one contributes in a manner that enhances one’s acceptability. Furthermore, the fact that one is a little remote from day-to-day vicissitudes, enhances the clarity of thought and objectivity of decision making by visualizing multiple scenarios and what-if situations.

I have found that start-up entrepreneurs in their excitement and enthusiasm to see their ideas to fruition tend to become unipolar in their thinking and fail to develop an appreciation of the connected interplay of various factors that influence the outcome of their enterprise. For example, they often tend to de-emphasize the importance of prudent accounting principles and methodologies for income recognition or risk evaluation. These matters may lead to qualifications by statutory auditors or emphasis of matter in their reports to the Board and paradoxically these very lacunae have an impact on the valuation of the enterprise in the eyes of the market thus impacting the very objectives they seek to achieve. Often these companies have a cross-border operation and then they need to develop an appreciation of aspects like management of currency risks or regulatory compliance in different jurisdictions. Thus, they tend to create an ambitious footprint without an adequate understanding of the underlying risks and create unforeseen vulnerabilities. Other common omissions lead to appreciation of data privacy considerations, IT security considerations and making adequate investments to address these requirements.

Professional excellence by itself cannot lead to results without empathy and an understanding of people. The organization is comprised of people of varying capabilities and the leader has to shape the team to drive it towards overall excellence. Empathy in turn inculcates a culture of commitment that drives employees to maximize their effort and commitment. There is also a huge dissemination effect by observing others in the organization. In my professional experience there was an instance where a promising employee got impacted by a debilitating illness. Despite a lot of pressure to grant him a financial settlement and replace the vacancy because of headcount pressures I called my team into a huddle and said that we owed it to our colleague to individually step up and fill in for him. Despite work pressures the entire team readily agreed and this created a positive influence that no amount of financial incentives or inducements could achieve. This underscores the enormous positive impact of empathy on the part of the leader that delivers an extremely impactful message that resonates across the organization.

My engineering degree at IIT Kharagpur put me through a syllabus of quantitative rigor that led to exceptional sharpening of numerate and basic analytical skills. It created the capacity to deal with abstruse and complex mathematical and statistical models that created a mental framework for decision making by breaking a complex problem into simple variables understanding their interplay and developing a predictive ability to simulate outcomes. The range of courses in basic physical sciences to applied disciplines enabled me to get a clear understanding of how technology has been built on the basic principles of physical sciences. If IIT provided the quantitative foundational depth, IIM was a completely different experience by exposing me to a range of economic principles, behavioral sciences, elements of political history and social sciences that led to a deep appreciation of the softer skills and widening as well as deepening of the intellectual span. It taught me to look at history and sociopolitical as well as economic issues with a different lens and exposed me to an academic fraternity that were actually putting these skills to work in a variety of industry and policy situations. To this day I feel that my engineering degree created a quantitative bias in me that enabled me to relate to financial management theory, risk modelling or capital planning and translate these to situations that I encountered as CFO. It is my firm conviction that an Engineer/MBA is in no way an inferior qualification for a CFO as is sometimes attributed.

I think universities must instill in future leaders the strongest sense of ethical conduct and values that will propel their conduct like a beacon through their lives. This should be done through a curated set of courses enunciating the core principles of ethical conduct supported by case studies from live business situations drawing upon examples of business leaders who have abided by the highest principles of ethical conduct as well as those of the other kind. Examples can be drawn from real life successes and failures and what are the lessons to be drawn from such case studies. The development of ethical conduct can be the ultimate outcome of prudential risk management and compliance principles that will equip students with an awareness that will serve them well through their careers.

I would urge a young finance professional to be judicious in their initial career choices as this leaves a permanent imprint on their career. They should serve their initial period of apprenticeship in a firm or organization known for the quality of their financial systems, policies and processes. This creates a firm imprint in their minds and becomes a template for their future learning and what they can apply to other situations. This may entail some degree of compromise on the speed of their progression but rather than getting frustrated, they should use this period to maximize their learning by an exposure to the wide repertoire of learning materials available.

Over the years the experience that has changed me most as a person is to learn to devote a greater attention to listening skills. I have learnt that becoming more receptive to the views of others as expressed in conversation or discussion leads to a diversity of thought that breeds a richness and enables in the formulation of one’s own ideas in a more inclusive way that not only enhances the intellectual content but also other dimensions as human appeal, attention to various risks in execution or highlighting points that initially eluded me. This has been a single most important factor in developing my overall acumen and the qualities I bring to bear.

This is indeed a question that prompts you to look back on your life. As I picture myself as a young strapling cast into the complex world of commercial life in Mumbai from the relatively sheltered environs of business school, I would tell myself to do something yet simultaneously realizing whether it is at all possible, namely to develop a more inclusive view of life. In my academic life, I was imbued with a spirit to strive for academic excellence to the exclusion of many other facets of life that would have contributed to developing a richer view of life. If I were to live life again, I would have sought to participate to a greater degree in community initiatives as an example. Another aspect I would have focused on is to make a greater effort to nurture relationships. I do realize that this has been greatly facilitated by the enormous strides made in social media that we lacked in our younger years. Another theme I would focus on is to make a greater effort to participate more closely and emotively in the growth phase of my children because I have realized sadly that as they go through adolescence their own lives acquire a centrality and the childhood experience does not come back for sharing.

A principle that I have sought to follow throughout my life, I do not know with what degree of success, is to uphold without any compromise ethical values and principles. Across my experience initially as a junior executive and then ascending the layers of seniority to the world beyond executive life, in the world of Boards, I have learnt that respect is ultimately earned through one’s conduct and that has as much influence on others as other parameters of success. These values are developed in one’s initial years and one has a chance to display them in later life that this is a silent ambassador that is instrumental to earning the respect of peers and others alike. In doing so one often has to choose between an easier and more difficult path but the choice has enduring value that manifests itself in multifarious ways. Inasmuch as exercising this choice has not always been easy, I would not trade this for anything else.

I searched repeatedly but could not find any single principle that I had once held strongly but would like to change because of my experience.

A question I often ask, to which I do not have a complete answer is how in a developing economy like India the business community can express a greater degree of social awareness and contribute to the well-being of the community. As our country is progressing rapidly along the path of economic development, sadly the disparities between different strata of society are increasing. How can corporate India help in closing this gap, for which there could be several ways say enhancing the scope of CSR activities, greater participation in the community efforts such as skilling. This is something for which I do not have a complete answer.

The one principle from my entire journey that I would like to be remembered is that here was somebody who always chose the path of the right principle without an eye on the outcome, who was not influenced by any other factor other than upholding the principles that would lead the organization who had retained my services in the right direction first ethically and then upholding customer interests. If I was an executive, I sought to maximize the performance of the organization in a legitimate way whereas as an Independent Director I sought to spare no effort to enhance the effectiveness of the Board even if this entailed presenting an alternate view to the majoritarian view.

I would like to narrate here an experience that I encountered in my Board experience. I was a member of a Board of a Bank that merged with a NBFC that amounted to a virtual management buyout. I would like to believe that I had played a formative role in the evolution of the Bank Board. This was not appreciated by the incoming management, the MD of the NBFC who became the MD of the bank as a succession arrangement. After a few weeks, he called me and said that he was uncomfortable with my participation in one other NBFC Boards. He started saying that his NBFC had certain proprietary practices and he feared loss of competitive position. I countered that there was no regulatory prohibition, I was signatory to a code of ethics and a fit and proper declaration and would follow in letter and spirit. As he still appeared to harbor doubt, I offered that the relationship was built on trust and if that was brought to question, it was not acceptable to me and I would rather walk away. Not expecting such a position, he protested that this was an extreme reaction. I stuck to my point of view and this is something I have not regretted, as I held my core principles sacrosanct.