An Indian risk management expert has called for the establishment of a dedicated Ministry of Risk Management, citing growing geopolitical tensions and their wide-ranging impact on energy markets, trade, insurance, and financial stability.
Speaking in an interview, Dr Sonjai Kumar, a risk management professional based in India, said the current global environment is not only increasing risk exposure but also changing the way risks must be assessed, managed, and governed across both public and private sectors.
He noted that recent developments have exposed structural vulnerabilities in global systems that India is heavily dependent on, including energy imports, international trade routes, and financial flows.
Impact on insurance markets
Dr Kumar said one of the most immediate effects of global instability is being seen in the insurance sector, where coverage has become more difficult to obtain. In cases where coverage is available, premiums have increased significantly, while policy exclusions have become stricter.
He explained that this trend is prompting organisations to reassess their reliance on insurance as the primary method of risk transfer. Instead, companies are increasingly exploring alternative mechanisms such as captive insurance structures, parametric insurance products, and greater levels of self-retention of risk.
According to him, several insurance segments are being affected, including travel insurance, marine and cargo insurance, and political risk coverage, all of which are sensitive to global disruptions.
Energy and economic pressure
A major area of concern highlighted is energy security. India remains heavily dependent on imported crude oil, much of which is transported through key global shipping routes. Any disruption along these routes can lead to supply constraints and price volatility.
Dr Kumar said rising oil prices have broad economic implications, affecting inflation, corporate operating costs, and fiscal stability. He described energy risk as a systemic issue with consequences across multiple sectors of the economy.
He also noted that higher energy prices are contributing to capital outflows and putting pressure on the Indian currency. This, in turn, increases hedging costs for businesses and introduces balance sheet risks for companies with foreign currency exposure.
“Higher oil prices cascade through transportation, manufacturing, and services, creating broad-based cost pressures leading to stagflation, where growth slows even as inflation rises,” he said. “This results in margin compression, pricing uncertainty, and demand volatility.”
Call for institutional reform
Dr Kumar suggested that India should consider establishing a dedicated Ministry of Risk Management to strengthen national risk oversight and coordination. He argued that risk management should not be treated as a periodic activity, but as a continuous function integrated into governance structures.
He said risk management has traditionally been concentrated in financial sectors such as banking, insurance, and investment funds. However, recent global developments have demonstrated that risk exposure extends across all industries and sectors.
For companies operating in global supply chains, he noted that operational risks such as disrupted shipping routes, delayed logistics, and rising freight costs are becoming more common. These challenges, he said, cannot be addressed solely through traditional insurance or operational controls.
Instead, he emphasized the need for diversification across suppliers, geographic markets, and logistics networks as part of a broader strategic shift in risk planning.
External sector pressures
Dr Kumar also pointed to increasing pressure on India’s external sector. Rising import costs combined with disruptions in export markets are widening the current account deficit, which may have implications for currency stability and capital inflows.
He further highlighted risks related to human capital, noting that a significant number of Indian workers are employed in overseas markets, particularly in the Gulf region. Prolonged instability in these regions could affect employment conditions and remittance flows, with potential knock-on effects on domestic consumption.
Enterprise-wide risk management approach
According to Dr Kumar, organisations need to move toward an enterprise-wide approach to risk management, integrating it directly into corporate strategy rather than treating it as a compliance requirement.
He said this would involve strengthening governance structures, improving data systems, and enhancing organisational flexibility to respond to emerging risks.
He also recommended that companies establish dedicated risk management functions led by Chief Risk Officers. These roles would be responsible for continuous risk monitoring and proactive mitigation strategies rather than reactive responses after disruptions occur.
“Risk management must evolve from a compliance-driven function to a resilience-driven capability,” he said.
Broader outlook
Dr Kumar concluded that as global systems become increasingly interconnected and volatile, both governments and corporations will need to adopt more structured and forward-looking risk frameworks to maintain stability and competitiveness.
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