Arohan Financial Services Limited | Annual Report 2022-23

feature of the RBI guidelines, Risk based pricing, was implemented in true letter & spirit given that Risk planning and preparedness was already in place. This was a fundamental and favourable shift for long-term sustainability and the overall health of microfinance institutions, such as Arohan. Capital raise(s) from marquee investors, Credit Risk pricing and strategic planning deployed for spreading out the financial impact of the pandemic across the three financial years, within the regulatory and statutory domains, have ensured that Arohan emerged in much better health by the end of FY 2023. As a direct outcome of the revised Guidelines, the metamorphosis of the microfinance sector into retail lending has been hastened. Risk strategies implemented has the potential of establishing Arohan as one of the leading, profitable and well governed MFIs in the country. Risk Analytics & Practices In FY 2023, Arohan worked on further strengthening its Incisive Risk Analytics, enhancing capabilities using various statistical tools, large data processing software, and visual analytic tools such as Python, R, and Tableau. This reinforces the position of Arohan’s risk management unit to provide sector-leading, critical, rationale-driven business intelligence inputs to the management and the stakeholders. Such inputs and insights enhance the Company’s strategic planning capabilities and provide key actionable for the Management. Credit Risk Management Arohan deployed the microfinance industry’s first- in-the-sector credit acquisition scorecard, ‘NIRNAY’ during the year. The scoring results have aided the essential and timely deployment of the Credit Risk Pricing decision that came into effect on April 1, 2022, in line with the revised guidelines of the Reserve Bank of India. With this Arohan now offers differentiated Credit Risk pricing to higher-risk customer segments. The revised Credit Risk benchmarks along with the business monitoring & expansion tools have ensured that risk-taking is optimised and backed by solid rationale and numbers. Operational Risk Management Arohan’s proprietary Branch Risk (BRisk) assessment algorithm refreshed during the year, continued to proactively provide visibility of operational risks to the business team for effectively assessing operational risk all the way to the frontlines’ operating unit, the branches. The BRisk Grading of the entire Company at all levels up from the Branches provided the Business team, the Management and the Board of Directors with an impartial assessment of the operational health of Arohan’s active branches while indicating potential emerging risks. Enterprise Risk Management Arohan has been proactively working on the microfinance sector-specific ERM structure for a while now. That foresight started bearing fruits in FY 2023, with the Reserve Bank of India actively encouraging systemically important NBFCs, during their regular audits and in their specifically curated CRO Workshop, for the deployment of Enterprise Risk Management (ERM) systems. ERM is a globally well-established framework for effectively optimising Risk vis-à-vis Return, and providing accurate and insightful visibility on all risks inherent during the functioning of an organisation. As a mandate for the Risk unit, Arohan initiated the implementation of the Enterprise Risk Management (ERM) project using the COSO framework. Christened SANDESH, the project has made significant progress with the platform that was completely developed in-house. The platform is already operational with the respective Risk Owners approving the risk registers along with their controls and thresholds. Arohan is again the first in the sector for the development of ERM in true letter and spirit. Business Continuity Policy (BCP) In the early part of 2022, Arohan’s BCP deployment and practice, which was led and anchored by the Risk unit, got audited by the Reserve Bank of India and was found to be satisfactory. The implementation of the Business Continuity Policy and Plan of the Company has led to a well-established BCP process backed by well-trained BCP committees and stakeholders. The company continues to be ‘Business as Usual’ with the least disruptions during events of calamities and other disorders during the year. The Risk unit will continue to strengthen and anchor this important regulatory requirement for the Company. New Risk Initiatives After the successful deployment of the sector-leading credit acquisition scorecard, ‘NIRNAY’, Arohan’s Risk unit is now actively working on the next level of harnessing of its Data-Information Stack using Large Management Discussion & Analysis Annual Report 2022-23 | 58