Arohan Annual Report FY 20-21

In an externally challenged environment, Arohan chose to focus on consolidation of its operations, geographies and processes/policies. The Company’s 3-Pillar approach of Risk Management, Internal Control & Quality and Internal Audit, all based on the foundation of efficient Credit Underwriting, has ensured that the Company’s products were tailored specifically for customers’ needs and the resultant portfolio was monitored stringently. INDEPENDENT CREDIT VERTICAL Arohan has established a separate and independent Credit function to strengthen underwriting process with its continued and sharp focus on quality till the last mile. The Credit function of the Company has two sub-verticals of Organic Credit and Inorganic Credit managing the credit quality of its diversified business model. (1) Organic Credit: This vertical focuses on developing credit policies to ensure quality sourcing of the organic portfolio. To this effect, a three-pronged approach is maintained: • Credit Policy Formulation where each product and its related process are balanced with necessary credit checks, to ensure that the rigour of the customer selection process does not get diluted; • Credit Administratio n through app-based KYC and CB filters, cross-verified with a dedicated check unit and focused upskilling of field employees to mitigate credit risks; • Credit Quality Monitoring where credit performance of all branches are monitored and corrective measures, which includes Root Cause Analysis (RCA) of stressed accounts and ring fencing measures like cash flow analysis, ring leader identification, repayment discipline of the borrowers, further checks of KYCs and CB Records, etc. are implemented. (2) Inorganic Credit: This vertical generates credit decisioning regarding the on-boarding of inorganic partners and monitoring of their performance through various processes including Cross Validation of Total Collection amount, Triangulation of Activation, Collection Efficiency and PAR numbers, Cross checking of Entity’s portfolio with CRIF and guiding on course correction. Arohan has adopted a Credit Committee approach which undertakes a rigorous review mechanism, including audit checks, of each and every case of Term Loan or Sourcing & Collection relationship proposal. RISK MANAGEMENT APPROACH Arohan’s robust risk management framework, incisive analytics capabilities, and digital footprint of business and collections helped the Company be prepared for facing challenges throughout FY 2020-21. The Risk Management function of the Company is led by the Chief Risk Officer and has independent reporting to the Risk Management Committee of the Board of Directors, headed by an eminent Independent Director, with regular administrative guidance from the Managing Director of the Company. Risk Analytics, Insights and Actionable Focus Risk Analytics have been Arohan’s forte with the deployment of various statistical tools, large data processing software and visual analytics tools such as Python, R and Tableau. The incisive analytics and predictive capabilities of the Risk unit provided sector-leading critical inputs to the Management, such as activation cuts, portfolio projections and other deep insights and rationale-driven business intelligence inputs. These are critical for Arohan’s strategic planning and provide key actionable for the Management. Arohan’s proprietary Branch Risk (BRisk) assessment algorithm, whichprovides key visibility Management Discussion & Analysis 55