Chapter 4

CHAPTER IV
ANALYSIS AND INTERPRETATION
4.1 INTRODUCTION
Risk Management is not a one off activity. Risk Management is a

dynamic and evolving process. Managing Risk becomes more a matter of
understanding and seizing the opportunity. Effective Risk Management is
crucial to the survival of an institution in rapidly moving markets. This
study aims to know the corporate Risk Management practices among
different sectors. Seven industries have been taken in Tamil Nadu. The
primary data pertaining to corporate Risk Management practices were
collected though questionnaire. The main focus in this study is to find out
the intensity of different types of Risk faced by the organisations. Risk score
is calculated as the product of likelihood occurrence of Risk and impact of
occurrence of Risk. The likelihood occurrence of Risk, impact of occurrence
of Risk, Risk scores were chosen as dependent variable. The independent
variables selected for the study were sales, paid up capital, no of employees,
years of existence, nature of industry, Risk register database, Organisations
Risk communication strategy, documented Risk Management policy.
The influence of respondents paid up capital, sales, years of

existence, no of employees, budgeted expenses for Risk Management
activities over the Enterprise Risk Management Practices like
documentation of Risk policy, Risk register database, organisation Risk
communication strategy were tested. Apart from this an attempt has also
been made to find out the tools and techniques used to measure, manage the
Risks. For this purpose, appropriate statistical tools like One sample test
statistics, ANOVA, Chi square, Pearson correlation, Independent t test,
Kruskal Wallis test, Factor analysis, Kendalls coefficient of concordance
were employed for the analysis.
78
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TABLE 4.1.1 BASIC PROFILE OF THE RESPONDENTS
S.No. Factors Column title Nos. %
0-10 Cr 86 48.9
10-20 Cr 45 25.6
20-30 Cr 16 9.1
1 Paid up equity capital
30-40 Cr 7 4.0
40-50 Cr 6 3.40
> 50 Cr 16 9.0
0-100 Cr 81 46.0
100-200 Cr 27 15.3
200-300 Cr 12 6.8
2 Sales
300-400 Cr 7 4.0
400-500 Cr 10 5.7
> 500 Cr 39 22.2
< 10 yrs 13 7.4
11-20 yrs 62 35.2
Years of existence
3 21-30 yrs 43 24.4
> 30 yrs 58 33.0
Automotive 16 9.1
Chemicals 22 12.5
FMCG 9 5.1
Nature of Industry Manufacturing 84 47.7
Resources 7 4.0
4 IT & Technology 30 17.0
Construction 8 4.5
< 750 37 21.0
751-1500 20 11.4
Number of employees
5 1501-2250 54 30.7
> 2250 65 36.9
6 Total 176 100
79

The table 4.1.1 describes the basic profile of the respondents. Out
of 176 respondents, 86 respondents belong to the category of 0-10
crores paid-up capital. Majority of the respondents (48.9%) belong to this
category. 25.6% of the respondents occupy the 10-20 crores paid-up
capital category. Only 9% of companies are with a paid-up capital
of above 50 crores. The least percentage of respondents belong to
30-40 crores (4.0%) and 40-50 crores (3.40%) respectively.
Nearly 46% of the respondents have sales of 0-100 crores.

Twenty two percent of the respondents indicated that they have a sales
turnover above 500 crores. In the category of 100-200 crores sales
turnovers, only twenty seven respondents were found applicable. 6.8 %
and 5.7% of the respondents belong to the category of 200-300 crores
and 300-400 crores respectively. Only 4% of the respondents indicated
that their sales turnover is between 300-400 crore.
It is evident from the table that majority of the respondents year of

existence is between 11-20 years (35.2%). Thirty three percent of the
respondents have reported that their year of existence is above 30 years.
Twenty four percent of the respondents belong to the category of 21-30
years. The least represented category is less than 10 years of existence
(7.4%). The question pertaining to nature of industry reveals that seven
industries are covered. Among the seven industries, most of the
respondents reported that they belong to manufacturing sector (47.7%).
The representations of other industries are IT & Technology (17.0%),
Chemicals (12.5%), Automotive (9.1%) and FMCG (5.1%). The least
represented respondents hail from Construction (4.5%) and Resources
(4.0%) respectively.
80

In terms of the number of employees, 36.9% of the companies have
employed manpower of above 2250. Thirty one percent of the companies
have employee strength between 1501-2250. In the category of < 750
employees, 21% of the respondents pointed out that they belong to this
category. Only 11.4 % of the respondents reported that they have
employee strength of 751-1500.
81

TABLE 4.1.2 DOCUMENTATION OF RISK POLICY
No. of
S.No. Documentation of Risk Policy Percentage
Respondents
1 No 11 6.3
2 Yes 165 93.8
3 Total 176 100.0
Risk Policy clearly explains the objectives of Risk management

and indicates the responsibilities. In absence of such policy, a company
will be, at best, value-neutral; at worth value- destroying. The Risk Policy
provides the chief executive with the impetus for sustainable value
creation (Knight and Pretty 2001). In this regard, the table 4.1.2 shows
that the majority of the respondents documented the Risk Policy (93.8%).
Only 6.3% respondents do not have documented Risk Policy.
82

TABLE 4.1.3 RISK MANAGEMENT AND ITS INTEGRATION
S.No. Risk Management and its Strongly Strongly

Disagree Neutral Agree TOTAL
integration Disagree Agree
No of respondents 4 3 48 68 53 176
Risk Management
1 and board
Percentage 2.3 1.7 27.3 38.6 30.1 100.0
No of respondents 2 2 49 92 31 176
Risk Management
2
and SBU
Percentage 1.1 1.1 27.8 52.3 17.6 100.0
Risk Management No of respondents 0 0 44 90 42 176
3 and functional
units Percentage 0 0 25.0 51.1 23.9 100.0
83

The question related to Risk Management Integration with Board,
Strategic Business Unit and other Functional units revealed that the
majority of the respondents strongly agree that Board and the Risk
management function is integrated (38.6%), Risk Management and SBU
(52.3%), Risk Management and functional units (51.1%). Only few
respondents revealed that they disagree about the Risk management
functions integration with board and SBU. It is interesting to note that
none of the respondents quoted neither strongly disagree or disagree, for
Risk managements integration with the functional units. Integrated Risk
management ensures that the company is aware of the level of Risk that it
is taking on, and is thus better able to protect the balance sheet and
shareholder value (Colin Witheat 1999). Integrated Management of Risks
can provide a genuine competitive advantage when driven from a
coherent vision set by top management and implemented through an
aligned Risk management framework (Ernst & Young 1998).
84

TABLE 4.1.4 ORGANISATION HAS RISK COMMUNICATION
STRATEGY
Does Organisation has

No. of
S.No. Risk Communication Percentage
Respondents
Strategy
1 No 6 3.4
2 Yes 170 96.6
3 Total 176 100.0
From the table 4.1.4, it could be inferred that majority of the

respondents have Risk communication strategy (96.6%). Only 3.4% of
the respondents do not have Risk communication strategy. Open
communication of Risk Policy is pre-requisite for Risk management
function to succeed (KPMG report, 1997). The successful Risk
management rests on clear ownership, understanding throughout the
organisation and internal communication (Ernst & Young).
85

TABLE 4.1.5 RISK POLICY FRAMING
People Nature of Industry
S.No. involved
in Risk
Policy Automotive Chemicals FMCG Manufacturing Resources IT Construction Total
Framing
5 4 1 23 1 8 3
1 CEO (31.3%) (18.2%) (11.1%) (27.4%) (14.3%) (26.7%) (37.5%) 45
7 4 4 32 2 9 2
2 Board (43.8%) (18.2%) (44.4%) (38.1%) (28.6%) (30.0%) (25%) 60
9 10 5 31 3 12 5
3 CFO (56.3%) (45.5%) (55.6%) (36.9%) (42.9%) (40%) (62.5%) 75
1 0 1 9 0 0 0
4 Audit (6.3%) (0%) (11.1%) (10.7%) (0%) (0%) (0%) 11
2 5 0 12 1 2 0
5 RM (12.5%) (22.7%) (0%) (14.3%) (14.3%) (6.7%) (0%) 22
1 0 0 0 0 0 0
6 Others (6.4%) (0%) (0%) (0%) (0%) (0%) (0%) 1
Figures in parentheses denote percentages.
86

The table 4.1.5 clearly depicts the roles responsible for framing the
Risk Policy. In the case of automotive sector out of 16 respondents,
9 respondents (i.e., 56.3%) indicated that CFO involves in Risk Policy
framing. Apart from the CFO, the responsibility is also vested with Board
(43.8%) and CEO (31.3%). The least involved person in Risk Policy
framing is Audit committee, which is noticed from the table. It is also
evident from the table, that the CFO plays a significant role in framing the
Risk Policy in all the sectors covered. The Board also plays an equivalent
role in framing the Risk Policy next to CFO. In almost all the sectors, the
least involved person/cadre in framing Risk Policy is Risk Manager.
87

TABLE 4.1.6 RISK POLICY APPROVAL
People Nature of Industry Total

S.No. involved in
Risk Policy Automotive Chemicals FMCG Manufacturing Resources IT Construction
Approval
3 6 3 19 2 11 4
48
1 CEO (21.4%) (27.3%) (33.3%) (22.6%) (28.6%) (36.7%) (50%)
6 2 1 32 1 7 1
Board 50
2 (42.9%) (9.1%) (11.1%) (38.1%) (14.3%) (23.3%) (12.5%)
6 11 3 22 1 8 3
CFO 54
3 (42.9%) (50%) (33.3%) (26.2%) (14.3%) (26.7%) (37.5%)
1 2 1 10 2 1 0
Audit 17
4 (7.1%) (9.1%) (11.1%) (11.9%) (28.6%) (3.3%) (0%)
1 3 1 11 1 3 0
RM 20
5 (7.1%) (13.6%) (11.1%) (13.1%) (14.3%) (10%) (0%)
0 0 0 0 0 0 0
Others 0
6 (0%) (0%) (0%) (0%) (0%) (0%) (0%)
88

It is noted clearly, in Construction and IT & Technology sectors,
the primary responsibility in approval of Risk Policy lies with CEO. The
CEO plays a significant role in framing Risk Management Policy,
reporting and executing (Protiviti Research Report 2007). In the case of
automotive sector both Board (37.5%) and CFO (37.5%) plays a
significant role in approving the Risk Policy. This shows that the Board
involves actively in Risk Management process, in Automotive Sector.
Among 22 respondents in Chemical Sectors, 11 of them reported that in
their organization, the role of approving the Risk Policy is vested with
CFO. Similarly, in FMCG sector, majority of them indicated that CFO is
responsible for approving the Risk Policy. Whereas, in case of
manufacturing sector, the Board (38.1%) is responsible for approving the
Risk Policy.
89

TABLE 4.1.7 RISK IDENTIFIERS
Risk Nature of Industry

S.No.
Identifiers Automotive Chemicals FMCG Manufacturing Resources IT Construction Total
3 1 1 17 1 5 2
CEO 30
1 (18.8%) (4.5%) (11.1%) (20.2%) (14.3%) (16.7%) (25%)
4 2 0 22 2 4 1
Board 35
2 (25%) (9.1%) (0%) (26.2%) (28.6%) (13.3%) (12.5%)
10 8 2 21 1 7 2
CFO 51
3 (62.5%) (36.4%) (22.2%) (25.0%) (14.3%) (23.3%) (25%)
2 1 1 16 0 4 1
Audit 25
4 (12.5%) (4.5%) (11.1%) (19%) (0%) (13.3%) (12.5%)
4 12 5 22 4 11 2
LM 60
5 (25%) (54.5%) (55.6%) (26.2%) (57.1%) (36.7%) (25%)
2 0 1 9 0 1 2
RM 15
6 (12.5%) (0%) (11.1%) (10.7%) (0%) (3.3%) (25%)
1 0 1 1 1 0 0
All staff 4
7 (6.3%) (0%) (11.1%) (14.3%) (14.3%) (0%) (0%)
90

It is evident from table 4.1.7 that the Line Managers are
responsible for Risk identification. The next responsible person is CFO,
followed by Board and CEO. Sector wise analysis reveals that in the case
of Automotive Sector, CFO is responsible for Risk identification (62.5%).
It is interesting to note that in Manufacturing Sector, Board and Line
Managers share equal responsibility in identifying the Risks. In all the
other sectors Line Manager is responsible for Risk identification. The
least involved in Risk Identification is all the staff option.
91

TABLE 4.1.8 DEPICTING THE MODE OF PROMULGATION OF
RISK POLICY
No of % of
S.No. Promulgation of Risk Policy
Respondents Respondents
1 13.07
Distribution of the document 23
2 32.39
Placing the policy 57
3 Meetings, conferences, briefings

111 63.07
etc
4 33.52
Training courses 59
5 35.23
Newsletters & Circulars 62
6 52.84
Annual reports 93
7 18.75
Performance agreements 33
The table 4.1.8 reveals the Risk Policy promulgation throughout

the organisation (multiple responses). Organizations rely on a
combination of formal and informal communication modes. Annual Risk
Management reports are included in formal and informal communication
modes (Robert Bieber 1997). Out of 176 respondents, 63.07% of the
respondents communicated their Risk Policy through meetings,
conferences, briefings etc. Fifty three percent of them communicated
through annual reports. The least used mode of communication is
distribution of the document (13.07%). Thirty five percent of the
respondents replied that they use newsletters & circulars to disseminate
the information. So, it is observed that the organizations use at least any
one of the methods to pass the information to others.
92

TABLE 4.1.9 RISK REGISTER/ DATABASE
S.No. Risk Register /

No of Respondents Percentage
Database
1 No 52 29.5
2 Yes 124 70.5
3 Total 176 100.0
In order to manage the risks effectively, the organisations need to

know what risk it faces. The Risk register/ database become essential as it
records the identified Risks, their severity and the action to be taken.
From the above table, most of the respondents (71%) have Risk register /
database. Only 29% of the respondents does not have Risk register
database.
93

TABLE 4.1.10 CONTENTS OF RISK REGISTER DATABASE
Contents of Risk Register No of

S.No. Percentage
Database Respondents.
1 Source 46 37.10
2 Nature 49 39.52
3 Existing controls 67 54.03
4 Consequence and likelihood 76 61.29
5 Initial Risk rating 39 31.45
6 Vulnerability to external/internal 25 20.16

factors
7 Others 1 0.81
Further to the question of whether the organizations have Risk

register/ database, the contents of Risk register/ database were also
enquired, by giving multiple response option. Though there is no
prescribed format for the Risk register, it should contain the description
of Risk, impact and probability of occurrence, existing control systems,
and definition of highest priority Risks etc. The above table clearly
depicts that 61.2% of the respondents records the consequence and
likelihood of Risks in the Risk register database. Out of 124 respondents,
54.03% of the respondents record the existing control activities taken in
advance to reduce the probability and impact of the event. 39.52% of
them records the nature of Risk and 37.10% records the sources of Risk.
Only 31.45% of the respondents record the Initial Risk rating assigned.
The least recorded item in the Risk register/ database is vulnerability to
external/ internal factors.
94

TABLE 4.1.11 USAGE OF KEY INDICATORS TO ASSESS THE
LEVEL OF RISK
Key Indicators To Assess No of

S.No. Percentage
The Level of Risk Respondents
1 No 22 12.5
2 Yes 154 87.5
3 Total 176 100.0
KRI as a measurable metric provides insight into the companys

potential exposure or loss. KRI helps management to take proactive
action to respond to the Risk event. From the above table it is inferred
that majority of the respondents use KRIs to assess the level of Risk
(87.5%). Twelve point five percent of the respondents does not use Key
Risk indicators to assess the level of Risk. The recent survey by KPMG
has also pointed out 69% of the respondents use KRI as one of the major
source for identifying the sources or Risk (KPMG Risk Management
survey 2011).
95

TABLE 4.1.12 FREQUENCIES OF REVIEWING AND
MONITORING RISK
Frequency of Reviewing and No of

S.No. Percentage
Monitoring Respondents
1 Monthly 44 25.0
2 Quarterly 77 43.8
3 Annually 55 31.2
4 Total 176 100.0
KRI that was relevant last year might not be relevant this year
(Jonathan Davies, 2006). The above table indicates that 43.8 % of the
respondents review and monitor their Key Risk Indicators quarterly.
Thirty one percent of them monitor and review annually. Only 25% of the
respondents review on monthly basis.
96

TABLE 4.1.13 RESPONDENTS STATUS OF MANAGING RISK
USING COMPUTER SOFTWARE
Managing Risk Using No of

S.No. Percentage
Computer Software Respondents
1 No 57 32.4
2 Yes 119 67.6
3 Total 176 100.0
The table 4.1.13 shows that out of 176 respondents, 67.6% of them
use computer software for managing Risk. Only 32.4 % of the
respondents reported that they do not use any computer software to
manage Risk. Among the 119 respondents, those who used computer
software for managing Risk, 52.1 % of them relay upon off the shelf
software and the rest 43.7 % relay upon their own in-house developed
computer software for managing Risk. Further when the respondents
were asked to disclose the name of the software, they denied disclosing as
it was highly confidential.
97

4.2 MEAN AND STANDARD DEVIATION FOR THE
LIKELIHOOD OF OCCURRENCE OF RISK
To find out the variations of all the Likelihood Occurrences of

risks, Mean, Standard deviation, Coefficient of variation was computed,
which is portrayed in the Table 4.2.1.
TABLE NO 4.2.1 ONE SAMPLE STATISTICS OF LIKELIHOOD

OCCURRENCE OF RISK
S.No. Likelihood Occurrence Weighted Std. Coefficient

of Risk Average Deviation of variation
Mean
1 Credit 3.7330 0.77992 20.893
2 Financing 3.6818 0.67689 18.385
3 Market 3.6648 0.72199 19.701
4 Treasury 3.3807 0.73870 21.851
5 Regulatory 3.4034 0.80128 23.544
6 IT 3.1989 0.82129 25.674
7 Strategic 3.1648 0.73376 23.185
8 Environmental 3.1989 0.84866 26.530
9 Operational 3.1989 0.77105 24.104
10 Reputational 3.1307 0.84851 27.103
11 Political 3.0341 0.91275 30.083
12 Natural Hazard 2.9716 0.90981 30.617
13 Human Capital 3.0057 0.74448 24.769
14 Industry 3.1648 0.84252 26.622
15 Overall Weighted Average Mean Score 3.28
98

The mean, standard deviation and coefficient of variance for each
Risk probability was calculated.
Table No 4.2.1 shows the overall mean and standard deviation of

probabilities of each Risk category. Weighted average means for each
type of risks were calculated.
The mean value ranges from 2.9716 to 3.7330. The Overall

Weighted Average Mean Score of the likelihood of occurrence of risks is
found to be 3.28. The standard deviation represents how far it deviates
from the mean value. The higher the standard deviation the greater the
risk is. It is noted that the maximum standard deviation value is for
Political Risk (0.91275). The lowest value is for Financing Risk
(0.67689). The Coefficient of variation (CV) is defined as the standard
deviation of a variable divided by its mean. CV a measure of variation
can be used to indicate variability among populations. The lower the CV,
the higher the relative reliability of the estimate. A high CV value reflects
inconsistency among the sample within the group. The CV value ranges
from 18.38% to 30.61%.
It is noted that Credit Risk having a mean value of 3.7330, which is

the highest mean value among the different types of Risk. The Natural
Hazard Risk has the lowest mean value of 2.9716. It is interesting to note
that Environmental, Operational and IT Risk have the similar mean
values (i.e., 3.1989). The mean values of all risk categories have been
taken for further testing against the average score of the likelihood of
occurrence of risks to find whether these risks have high or higher
probability of occurrence.
99

4.2.2 TESTING THE MEAN VALUE WITH A HYPOTHETICAL
VALUE (ONE SAMPLE T TEST)
One sample t test was used to test statistically whether the

likelihood of occurrence of different Risk categories is around the scale
mean of 3.28 at 0.05 level of significance. The scores range from 1 to 5.
The calculated average score (3.28), is taken as test value for this
analysis. Risks having probability means greater than 3.28 were
considered to have high probabilities of occurrence.
H01: No difference exists between the average score of the

likelihood of occurrence of risks and the mean level of a. Credit Risk, b.
Financing Risk, c. Market Risk Treasury Risk, d. Regulatory Risk, e. IT
Risk, f. Strategic Risk, g. Environmental Risk, h. Operational Risk, i.
Reputational Risk, k. Political Risk, l. Natural Hazard Risk, m. Human
Capital Risk and n. Industry Risk.
When the p value is less than 0.05 at 0.05 level of significance, null
hypothesis is rejected and the alternate hypothesis of that there exists
significant difference between the average score of the Likelihood of
Occurrence of risks and mean level of specific risk is established. If the p
value is greater than 0.05 at 0.05 level of significance null hypothesis of
that there is no significant difference between the average score of the
Likelihood of Occurrence of risks and mean level of specific risk is
accepted.
100

TABLE 4.2.2 ONE SAMPLE TEST STATISTICS FOR
LIKELIHOOD OF OCCURRENCE OF RISK
Likelihood of Test value = 3.28 Remarks

S.No. Occurrence t p value Level of
of Risk significance
1 Credit 7.705 0.000 0.05
2 Financing 7.875 0.000 0.05
3 Market 7.070 0.000 0.05
4 Treasury 1.808 0.072 Not significant
5 Regulatory 2.043 0.043 0.05
6 IT -1.311 0.192 Not significant
7 Strategic -2.083 0.039 0.05
8 Environmental -1.268 0.206 Not significant
9 Operational -1.396 0.164 Not significant
10 Reputational -2.335 0.021 0.05
11 Political -3.574 0.000 0.05
12 Natural -4.497 0.000 0.05
Hazard
13 Human -4.888 0.000 0.05
Capital
14 Industry -1.814 0.071 Not significant
The results of one sample t test show statistical significance for all
types of Risks except for Treasury Risk, IT Risk, Environmental Risk,
Operational Risk and Industry Risk. When the formulated hypothesis is
rejected, the average score and the specific risk mean score is compared.
When the overall probability means of different risk categories falls
below 3.23, it indicates that their likelihood occurrence is low. When the
overall probability means of different risk categories falls above 3.23, it
indicates that their likelihood occurrence is high.
101

The results of the hypothesis are presented below
4.2.2 a) From table No 4.2.2, the p value of Credit Risk is found to

be 0.000 at 0.05 level of significance. Since the p value is < 0.05, null
hypothesis is rejected. There is significant difference between the average
score of Likelihood occurrence of risks and mean level of Credit Risk.
The mean level of Likelihood of occurrence of Credit Risk is above the
average score of Likelihood occurrences of risk (3.73> 3.28), it is inferred
that Likelihood occurrence of Credit Risk has high probability of
occurrence.
4.2.2 b) The p value of Financing Risk is 0.000, which is

statistically significant at 0.05 level of significance. Null Hypothesis is
rejected and it is concluded there is significant difference between the
average score of Likelihood occurrence of risks and mean level of
Financing Risk. The overall probability mean of Financing Risk falls
above 3.23 which indicate that the Likelihood occurrence of Financing
Risk is high.
4.2.2 c) In case of likelihood occurrence of Market Risk, the

p value (0.000), is found to be less than 0.05. Here, the null hypothesis is
rejected. Therefore there is significant difference between the average
score of Likelihood occurrence of risk and mean level of Market Risk.
The overall probability mean of Market Risk falls above 3.23 which
indicate that the Likelihood occurrence of Market Risk is high.
4.2.2 d) It is inferred from the table 4.2.2, that the p value for
Treasury Risk is 0.72 at 0.05 level of significance. Null hypothesis is
accepted. There is no significant difference between the average score of
Likelihood occurrence of risks and mean level of Treasury Risk.
102

4.2.2 e) The p value for Regulatory Risk is 0.043, which is found to
be statistically significant at 0.05 level of significance. The null
score of Likelihood occurrence of risks and mean level of Regulatory
Risk . The mean level of Likelihood of occurrence of Regulatory Risk is
above the average score of Likelihood occurrences of risk (3.40> 3.28), it
is inferred that Likelihood occurrence of Regulatory Risk has high
probability of occurrence.
4.2.2 f) It is noted from the Table 4.2.2, IT Risk is statistically

significant at 0.05 level of significance because p value (0.19) is greater
than 0.05. Therefore, null hypothesis is accepted. There is no significant
difference between the average score of Likelihood occurrence of risks
and mean level of IT Risk. Since IT Risk has a probability mean of 3.19
which around the scale mean of 3.2, it is found to have medium risk
probabilities.
4.2.2 g) The p value for Strategic Risk is 0.039, which is

rejected and therefore there is significant difference between the average
score of Likelihood occurrence of risk and mean level of Strategic Risk.
The overall probability mean of Strategic Risk around the scale mean of
3.23 which indicate that the Likelihood occurrence of Strategic Risk is
medium.
4.2.2 h) The p value for Environmental Risk is found to be 0.206,

which is greater than 0.05 at 0.05 level of significance. Therefore, null
hypothesis is accepted to emphasise that there is no significant difference
between the average score of Likelihood occurrence of risk and mean
level of Environmental Risk.
103

4.2.2 i) It is noted that the p value for Operational Risk is 0.164,
which is found to be statistically insignificant at 0.05 level of
significance. Null hypothesis is accepted and there is no significant
difference between the average score of Likelihood occurrence of risk
and mean score of Operational Risk.
4.2.2 j) Reputational Risk is statistically significant at 0.05 level of

significance, since the p value 0.021 is less than 0.05. Here null
hypothesis is rejected and therefore there is significant difference
level of Reputational Risk. The overall probability mean of Reputational
risk falls below 3.23 which indicate that the Likelihood occurrence of
Reputational Risk is low.
4.2.2 k) In case of Political Risk, the p value (0.000) is found be

less than 0.05, at 0.05 level of significance. Null hypothesis is accepted
and therefore there is significant difference between the average score of
Likelihood occurrence of risk and mean level of Political Risk. The
overall probability mean of Political Risk falls below 3.23 which indicate
that the Likelihood occurrence of Political Risk is low.
4.2.2 l) The p value for Natural Hazard Risk is 0.000, which is

found be statistically significant at 0.05 level of significance. Null
hypothesis is rejected and therefore there is significant difference
level of Natural Hazard Risk. The overall probability mean of Natural
Hazard Risk falls below 3.23 which indicate that the Likelihood
occurrence of Natural Hazard Risk is low.
4.2.2 m) Table No 4.2.2 shows that the p value for Human Capital
Risk is 0.000, which is statistically significant at 0.05 level of
104

significance. Here null hypothesis is rejected and therefore there is
significant difference between the average score of Likelihood occurrence
of risk and mean level of Human Capital Risk. The overall probability
mean of Human Capital Risk falls below 3.23 which indicate that the
Likelihood occurrence of Human Capital Risk is low.
4.2.2 n) It is inferred from the Table 4.2.2, the Industry Risk is

statistically insignificant at 0.05 level of significance, since the p value
0.071. Null hypothesis is accepted. There is no significant difference
between the average scores of Likelihood occurrence of risk and mean
score of Industry Risk.
It is noted from the table 4.2.2 the Likelihood Occurrences of

Credit Risk, Financing Risk, Market Risk, Regulatory Risk were found to
have high probability of Occurrence. This may be due to the
characteristic nature of the sampled industries. Information Technology
Risk and Strategic Risk had overall probability means around the scale
mean indicating that their Likelihood Occurrence is medium.
Reputational Risk, Political Risk, Natural Hazard Risk, Human Capital
Risk were found to have low probability of Occurrences.
105

4.2.3 MEAN AND STANDARD DEVIATION FOR THE IMPACT
OF OCCURRENCE OF RISK
To find out the variations of all the Impact of Occurrences of

Risks, Mean, Standard deviation, Coefficient of variation was computed,
which is shown in the Table 4.2.3.
TABLE NO 4.2.3 ONE SAMPLE STATISTICS OF IMPACT OF

OCCURRENCE OF RISK
Weighted
Std. Coefficient
S.No. Impact of Occurrence Average
Deviation of variation
Mean
1 Credit 3.6080 0.82097 22.75
2 Financing 3.6591 0.70729 19.33
3 Market 3.6591 0.68262 18.66
4 Treasury 3.4602 0.76987 22.25
5 Regulatory 3.4261 0.73694 21.51
6 IT 3.2784 0.76104 23.21
7 Strategic 3.2500 0.78194 24.06
8 Environmental 3.2500 0.81766 25.16
9 Operational 3.3409 0.80550 24.11
10 Reputational 3.1534 0.82413 26.13
11 Political 3.1591 0.78393 24.82
12 Natural Hazard 3.1818 0.82178 25.83
13 Human Capital 3.2045 0.77325 24.13
14 Industry 3.2614 0.77819 23.86

Risk probability was calculated.
106

Impact of Occurrences of each Risk category. Weighted average mean for
each type of risk was calculated.
The mean value ranges from 3.1534 to 3.6591. The Overall

Weighted Average Mean Score of the Impact of occurrence of risks
presented is found to be 3.34. The standard deviation represents how far it
deviates from the mean value. The higher the standard deviation the
greater the risk is. It is noted that the maximum standard deviation value
is for Reputational Risk (0.82413). The lowest value is for Market Risk
(0.6826). The Coefficient of variation (CV) is defined as the standard
deviation of a variable divided by its mean. CV a measure of variation
can be used to indicate variability among populations. The lower the CV,
the higher the relative reliability of the estimate. A high CV value reflects
inconsistency among the sample within the group. The CV value ranges
from 18.66% to 26.13%.
It is noted that both Market Risk and Financing Risk have a mean
value of 3.6591, which is highest mean value among the different types of
Risks. The Reputational Risk has the lowest mean value of 3.1534. The
mean values of all risk categories have been taken for further testing
against the average score of the Impact of occurrence of risks to find
whether these risks have high or higher impact of occurrence.
107

One sample t test was used to test statistically whether the impact
of occurrence of different Risk categories is around the scale mean of
3.34 at 0.05 level of significance. The scores range from 1 to 5. The
calculated average score (3.34), is taken as test value for this analysis.
Risks having means greater than 3.34 were considered to have high
impact of occurrence.
H02: No difference exists between the average score of the impact

of occurrence of risks and the mean level of a. Credit Risk, b. Financing,
c. Market Risk Treasury Risk, d. Regulatory Risk, e. IT Risk, f. Strategic
Risk, g. Environmental Risk, h. Operational Risk, i. Reputational Risk, k.
Political Risk, l. Natural Hazard Risk, m. Human Capital Risk and n.
Industry Risk.
When the p value is less than 0.05 at 0.05 level of significance, null
hypothesis is rejected and the alternate hypothesis of that there exists
significant difference between the average score of the Impact of
Occurrence of risks and mean level of specific risk is established. If the p
value is greater than 0.05 at 0.05 level of significance null hypothesis of
that there is no difference significant difference between the average
score of the Impact of Occurrence of risks and mean level of specific risk
is accepted.
108

TABLE 4.2.4 ONE SAMPLE TEST STATISTICS FOR IMPACT
OF OCCURRENCE OF RISK
Impact of Test Value = 3.34 Remarks/ Level

S.No.
Occurrence t p value of Significance
1 Credit 4.330 0.000 0.05
2 Financing 5.985 0.000 0.05
3 Market 6.201 0.000 0.05
4 Treasury 2.072 0.040 0.05
5 Regulatory 1.551 0.123 Not significant
7 Strategic -1.527 0.129 Not significant
9 Operational 0.015 0.988 Not significant
10 Reputational -3.004 0.003 0.05
11 Political -3.062 0.003 0.05
12 Natural Hazard -2.554 0.012 0.05
13 Human Capital -2.324 0.021 0.05
4.2.4 a) From table No 4.2.4, the p value of Credit Risk is found to

be 0.000 at 0.05 level of significance. Since the P value is < 0.05, null
score of Impact of occurrence of risks and mean level of Credit Risk. The
mean level of Impact of occurrence of Credit Risk is above the average
score of Impact of occurrences of risk (3.60> 3.34), it is inferred that
Credit Risk has high impact of occurrence.
109

4.2.4 b) The p value of Financing Risk is 0.000, which is
rejected and there is a significant difference between the average score of
Impact of occurrence of risks and mean level of Financing Risk. The
overall impact mean of Financing Risk falls above 3.34 which indicate
that the Impact of occurrence of Financing Risk is high.
4.2.4 c) In case of Impact of occurrence of Market Risk,

the p value (0.000), is found to be less than 0.05 at 0.05 level of
significance. Here the null hypothesis is rejected. Therefore there is a
significant difference between the average score of Impact of occurrence
of risks and mean level of Market Risk. The overall impact mean of
Market Risk falls above 3.34. From this it is understood that the impact
of occurrence of Market Risk is also high.
Treasury Risk is 0.040 at 0.05 level of significance. Since the p value is
less than 0.05, null hypothesis is rejected. There is significant difference
between the average score of Impact of occurrence of risks and mean
level of Treasury Risk.
4.2.4 e) The significant value for Regulatory Risk is 0.123, which

is found to be statistically insignificant at 0.05 level of significance. The
null hypothesis is rejected and it is concluded that there is no significant
difference between the average score of Impact of Occurrences of risks
and mean level of Regulatory Risk.
4.2.4 f) It is noted from the Table 4.2.4, IT Risk is statistically

insignificant at 0.05 level of significance because p value (0.284) is
greater than 0.05. Therefore, null hypothesis is accepted. There is no
110

significant difference between the average score of Impact of occurrence
of risks and mean level of IT Risk.

statistically insignificant at 0.05 level of significance. Null Hypothesis is
accepted and it is concluded that there is no significant difference
between the average score of Impact of occurrence of risks and mean
level of Strategic Risk.
4.2.4 h) The p value for Environmental Risk is found to be 0.146,

which is greater than 0.05 at 0.05 level of significance. Therefore, null
hypothesis is accepted to emphasise that there is no significant difference
between the average score of Impact of occurrence of risk and mean level
of Environmental Risk.
4.2.4 i) It is noted that the p value for Operational Risk is 0.988,

which is found to be statistically significant at 0.05 level of significance.
Null hypothesis is rejected and there is no significant difference between
the average score of Impact of occurrence of risk and mean score of
Operational Risk.
4.2.4 j) Reputational Risk is statistically significant at 0.05 level of

hypothesis is rejected and it is stated that there is significant difference
between the average score of Impact of occurrence of risk and mean score
of Reputational risk. The overall impact mean of Reputational Risk falls
below 3.34 which indicate that the Impact of occurrence of
Reputational Risk is low.
4.2.4 k) In case of Political Risk, the p value (0.003) is found be

less than 0.05, at 0.05 level of significance. Null hypothesis is rejected
111

and therefore there is significant difference between the average score of
Impact of occurrence of risk and mean score of Political risk.. The overall
impact mean of Political Risk falls below 3.23 which indicate that the
Impact of occurrence of Political Risk is low.

found be statistically significant at 0.05 level of significance. Null
hypothesis is rejected and there is significant difference between the
average score of Impact of occurrence of risk and mean level of Natural
Hazard Risk. The overall impact mean of Natural Hazard Risk falls below
3.23 which indicate that the Impact of occurrence of Natural Hazard
Risk is low.
4.2.4 m) Table No 4.2.4 shows that the p value for Human Capital
Risk is 0.021, which is statistically significant at 0.05 level of
significance. Here null hypothesis is rejected and there is significant
difference between the average score of impact of occurrence of risk and
mean level of Human Capital Risk. The overall probability mean of
Human Capital Risk falls below 3.23 which indicate that the Impact of
occurrence of Human Capital Risk is low.
4.2.4 n) It is inferred from the Table 4.2.4, the Industry Risk is

statistically insignificant at 0.05 level of significance, since the p value is
0.182. Hence null hypothesis is accepted. There is no significant
difference between the average scores of Impact of occurrence of risk and
mean score of Industry Risk.
It is noted from the table 4.2.4 the Impact of Occurrences of Credit

Risk, Financing Risk, Market Risk, Treasury Risk were found to have
high impact of Occurrence. This may be due to the characteristic nature
of the sampled industries. Political Risk, Reputational Risk, Natural
112

Hazard Risk and Human Capital Risk were found to have low impact of
Occurrences. This may be due to the characteristic nature of the sampled
industries.
113

4.2.5 TESTING THE MEAN VALUES OF RISK SCORE
Risk Score
Risk score is the product of likelihood occurrence of Risk and

impact of occurrence of Risk. For each type of Risk, the below mentioned
formula was taken into account for calculation of Risk score respectively.
CRS = LOCR * IOCR (Where CRS = Credit Risk Score,

LOCR=likelihood occurrence of Credit Risk, IOCR =impact of
occurrence of Credit Risk).
FRS = LOFR * IOFR (Where FRS=Financing Risk Score,

LOFR=likelihood occurrence of Financing Risk, IOCR =impact of
occurrence of Financing Risk).
MRS = LOMR *IOMR (Where MRS =Market Risk Score,

LOMR=likelihood occurrence of Market Risk, IOMR =impact of
occurrence of Market Risk).
TRS = LOTR *IOTR (Where TRS=Treasury Risk Score,

LOTR=likelihood occurrence of Treasury Risk, IOTR =impact of
occurrence of Treasury Risk).
RRS = LORR *IORR (Where RRS=Regulatory Risk Score,

LORR=likelihood occurrence of Regulatory Risk, IORR =impact of
occurrence of Regulatory Risk).
ITRS = LOITR * IOITR (Where ITRS = IT Risk Score,

LOITR=likelihood occurrence of IT Risk, IOITR =impact of occurrence
of IT Risk).
114

SRS = LOSR *IOSR (Where SRS= Strategic Risk Score,
LORR=likelihood occurrence of Strategic Risk, IORR =impact of
occurrence of Strategic Risk).
ERS = LOER *IOER (Where ERS= Environmental Risk Score,

LOER=likelihood occurrence of Environmental Risk, IOER =impact of
occurrence of Environmental Risk).
ORS = LOOR *IOOR (Where ORS= Operational Risk Score,

LOOR=likelihood occurrence of Operational Risk, IOOR =impact of
occurrence of Operational Risk).
RERS = LORER *IORER (Where RERS= Reputational Risk

Score, LORER=likelihood occurrence of Reputational Risk, IORER
=impact of occurrence of Reputational Risk).
PRS = LOPR *IOPR (Where PRS= Political Risk Score,

LOPR=likelihood occurrence of Political Risk, IOPR =impact of
occurrence of Political Risk).
NHRS = LONHR *IONHR (Where NHRS= Natural Hazard Risk

Score, LONHR=likelihood occurrence of Natural Hazard Risk, IONHR
=impact of occurrence of Natural Hazard Risk).
HCRS = LOHCR *IOHCR (Where HCRS= Human Capital Risk

Score, LOHCR=likelihood occurrence of Human Capital Risk, IOHCR
=impact of occurrence of Human Capital Risk).
IRS = LOIR *IOIR (Where IRS= Industry Risk Score,

LOIR=likelihood occurrence of Industry Risk, IOIR =impact of
occurrence of Industry Risk.
115

4.2.5 MEAN AND STANDARD DEVIATION FOR RISK SCORES
Risk score mean and standard deviation are shown in the Table
4.2.5
TABLE NO 4.2.5 ONE SAMPLE STATISTICS FOR RISK SCORES
Weighted
Std.
S.No. Risk Score Average Coefficient
Deviation
Mean of variation
1 Credit 13.8295 4.88782 35.34343
2 Financing 13.6875 3.82310 27.93132
3 Market 13.5568 4.07742 30.07657
4 Treasury 11.8977 4.14878 34.87044
5 Regulatory 11.8295 4.16303 35.19194
6 IT 10.7273 4.10499 38.26676
7 Strategic 10.4489 3.81242 36.48633
8 Environmental 10.7670 4.66442 43.32145
9 Operational 11.0057 4.64696 42.22321
10 Reputational 10.0511 4.02318 40.02726
11 Political 9.8580 4.31704 43.79225
12 Natural Hazard 9.7557 4.50174 46.14472
13 Human Capital 9.8409 3.84079 39.02885
14 Industry 10.6534 4.65732 43.71675

Risk score was calculated.

each Risk category. Weighted average mean for each type of risk was
calculated.
116

The mean value ranges from 9.755 to 13.83. The Weighted
Average Mean risk score is found to be 11.27. The standard deviation
represents how far it deviates from the mean value. The higher the
standard deviation the greater the risk is. It is noted that the maximum
standard deviation value is for Credit Risk (4.887). The lowest value is
for Natural Hazard Risk (3.8124). The Coefficient of variation (CV) is
defined as the standard deviation of a variable divided by its mean. CV a
measure of variation can be used to indicate variability among
populations. The lower the CV, the higher the relative reliability of the
estimate. A high CV value reflects inconsistency among the sample
within the group. The CV value ranges from 34.07% to 40.02%.
It is noted that Credit Risk mean value 13.83, is the highest mean
value among the different types of Risk. The Natural Hazard Risk has the
lowest mean value of 9.755. The mean values of all risk categories have
been taken for further testing against the average risk score to find
whether these risks have highest risk score.
117

One sample t test was used to test statistically whether the risk
score is around the scale mean of 11.27 at 0.05 level of significance. The
scores range from 5 to 25. The calculated average score (11.27), is taken
as test value for this analysis.
H03: No difference exists between the average risk score and the
mean level scores of a. Credit Risk, b. Financing, c. Market Risk
Treasury Risk, d. Regulatory Risk, e. IT Risk, f. Strategic Risk, g.
Environmental Risk, h. Operational Risk, i. Reputational Risk, k. Political
Risk, l. Natural Hazard Risk, m. Human Capital Risk and n. Industry
Risk.
When the p value is above 0.05 at 0.05 level of significance, null

hypothesis is accepted and it is concluded that there is no significant
difference between the average risk score and the Specific risk score. If p
value is below 0.05 at 0.05 level of significance, null hypothesis is
rejected and it is concluded that there is significant difference between
the average risk score and the specific risk score.
118

TABLE NO 4.2.6 ONE SAMPLE TEST STATISTICS FOR RISK
SCORE
Test Value = 11.27 Remarks/ Level of

S.No. Risk Score
t p value Significance
1 Credit 6.947 0.000 0.05
2 Financing 8.389 0.000 0.05
3 Market 7.441 0.000 0.05
4 Treasury 2.007 0.046 0.05
7 Strategic -2.857 0.005 0.05
9 Operational -0.755 0.452 Not significant
10 Reputational -4.019 0.000 0.05
11 Political -4.339 0.000 0.05
12 Natural Hazard -4.463 0.000 0.05
13 Human Capital -4.936 0.000 0.05
4.2.6 a) The p value for Credit Risk is 0.000, which is statistically

significant at 0.05 level of significance. Null Hypothesis is rejected and
therefore there is significant difference between the average risk score
and mean value of Credit Risk score. Credit Risk, with an overall risk
score mean is above the average risk score (13.82 >11.27). Therefore it
indicates that Credit Risk falls in high risk region.
4.2.6 b) The p value for Financing Risk is found to be 0.000. The p

value is less than 0.05, at 0.05 level of significance. Null hypothesis is
119

rejected and there is significant difference between the average risk score
and Financing Risk score. Financing Risk, with an overall risk score
mean 13.68 is above the average score 11.27. It shows that Financing
Risk falls in high risk region.
4.2.6 c) The p value for Market Risk is 0.000, which is found to be

statistically significant at 0.05 level of significance. The null hypothesis is
rejected and therefore there is significant difference between the average
risk score and Market Risk score mean. Market Risk with an overall risk
score mean 13.55 is above the average score 11.27. It is proved that
Market Risk falls in high risk region.
Treasury Risk is 0.046 at 0.05 level of significance. The p value is less
than 0.05, null hypothesis is rejected. Therefore there is significant
difference between the average risk score and Treasury Risk score mean.
Since the Treasury Risk with an overall risk score mean 11.90 is above
the average score 11.27, it is proved that the Treasury Risk falls in high
risk region.
4.2.6 e) The p value for Regulatory Risk is 0.076, which is greater

than 0.05. Null hypothesis is accepted. Therefore there is no significant
difference between the average risk score and Regulatory Risk score
mean.
4.2.6 f) It is noted that the p value for IT is 0.081, which is found

to be statistically insignificant at 0.05 level of significance and hence null
hypothesis of that there is no difference between the average risk score
and IT Risk score mean is accepted.
120

rejected and it is concluded that there is difference between the average
risk score and Strategic Risk score mean. The Strategic Risk score mean
10.44 is below the average risk score 11.27. Therefore Strategic Risk is
located in the low risk region.
4.2.6 h) The p value for Environmental Risk is 0.154, which is

above 0.05 at 0.05 level of significance. Therefore, null hypothesis is
accepted to emphasis that there is no difference between the average risk
score and Environmental Risk score mean.
4.2.6 i) It is noted from the Table 4.2.6, Operational Risk is

statistically insignificant at 0.05 level of significance, since p value
(0.452) is greater than 0.05 and hence null hypothesis of that there is no
difference between the average risk score and Operational Risk score
mean is accepted.
4.2.6 j) Reputational Risk is statistically significant at 5% level of

hypothesis is rejected and it is understood that there is difference between
the average risk score and Reputational risk score mean. The Overall
Reputational Risk score mean 10.05 is below the average risk score
11.27, indicating that Reputational Risk falls in the low risk region.
4.2.6 k) The p value for Political Risk is 0.000, which is less than
0.05, at 0.05 level of significance and hence null hypothesis of that there
is no difference between the average risk score and Political Risk score
mean is accepted. The Political Risk falls in the low risk region,
because the overall Political Risk score mean is below the average risk
score (9.858<11.27).
121

4.2.6 l) The p value for Natural Hazard Risk is 0.000, which is less
than 0.05, at 0.05 level of significance and hence null hypothesis of that
there is no difference between the average risk score and Natural Risk
score mean is accepted. The Overall Natural Hazard Risk score mean
9.755 is below the average risk score 11.27, indicating that Natural
Hazard Risk falls in the low risk region.
4.2.6 m) The p value for Human Capital Risk is 0.000, which is

less than 0.05, at 0.05 level of significance and hence null hypothesis of
that there is no difference between the average risk score and Human
Capital risk score mean is accepted. The Overall Human Capital risks
score mean 9.840 is below the average risk score 11.27, indicating that
Human Capital Risk falls in the low risk region.
4.2.6 n) The p value for Industry Risk is 0.081, which is greater

than 0.05, at 0.05 level of significance and hence null hypothesis of that
there is no difference between the average risk score and Industry is
rejected. Therefore there is difference between the average risk score and
Industry Risk score mean is accepted. Industry Risk falls in the moderate
risk region
It is noted from the table 4.4.6 that Credit Risk, Financing Risk,
Market Risk and Treasury Risk are located in high risk region. The
Likelihood of Occurrence and Impact of Occurrence of Credit Risk,
Financing Risk, Market Risk was also found to be high. Since the Risk
score is the product of Likelihood Occurrence of Risk and Impact of
Occurrence of Risk, the Overall Risk Score for Credit Risk, Financing
Risk, Market Risk and Treasury Risk being high is justified.
Reputational Risk, Political Risk, Natural Hazard Risk and Human
Capital Risk are found to be low. Even in these cases the Likelihood
122

Occurrence and Impact of Occurrence were found to be low. Therefore
the Overall Risk score for Reputational Risk, Political Risk, Natural
Hazard Risk and Human Capital Risk being low is also justified.
123

4.3 TESTING THE RELATIONSHIP
4.3.1 RELATIONSHIP BETWEEN PAID UP CAPITAL AND

LIKELIHOOD OF OCCURRENCE
Pearson Correlation was used to test the relationship between the paid up
capital and probability (likelihood of Occurrence) means of different Risk
categories.
The following hypothesis was formulated to test the relationship

between the Likelihood occurrence of Risk and Paid up capital at 0.05
level of significance. If the p value is greater than 0.05, null hypothesis is
accepted and it is concluded that there is no relationship between paid up
capital and probability (Likelihood of Occurrence) means of specific risk.
If the p value is less than 0.05, null hypothesis is rejected and it is
inferred that there is relationship between Paid up capital and Likelihood
occurrence of specific risk If the results are not significant further
analysis were not made.
H04: No relationship exists between paid up capital and

likelihood occurrence of a. Credit Risk, b. Financing, c. Market Risk
Risk.
124

TABLE 4.3.1 CORRELATION BETWEEN PAID UP CAPITAL
AND LIKELIHOOD OCCURRENCE OF RISK
Remarks
Likelihood of Pearson Nature of p
S.No. Level of
Occurrence Correlation correlation value
Significance
Not
1 Credit 0.036 Less 0.635
significant
Not
2 Financing 0.033 Less 0.666
significant
3 Market -0.180 Less 0.017 0.05
Not
4 Treasury -0.046 Less 0.542
significant
5 Regulatory 0.162 Less 0.031 0.05
Not
6 IT -0.006 Less 0.933
significant
7 Strategic -0.216 Definite 0.004 0.01
Not
8 Environmental 0.076 Less 0.315
significant
Not
9 Operational 0.066 Less 0.383
significant
Not
10 Reputational -0.012 Less 0.873
significant
Not
11 Political 0.059 Less 0.436
significant
Not
12 Natural Hazard -0.012 Less 0.869
significant
13 Human Capital 0.200 Definite 0.008 0.01
14 Industry -0.152 Less 0.045 0.05
4.3.1 a) In case of Likelihood of occurrence of Credit Risk, the

p value is 0.635 at 0.05 level of significance, which is statistically
insignificant. Hence null hypothesis is accepted and therefore there is no
125

relationship between Paid up Capital and Likelihood occurrence of Credit
Risk.
4.3.1 b) The r coefficient for Financing Risk is 0.033, with p value

0.666, which is greater than 0.05 at 0.05 level of significance. In this
case, null hypothesis is accepted and it is concluded that there is no
relationship between Paid up capital and Likelihood occurrence of
Financing Risk.
4.3.1 c) Market Risk is statistically significant with the p value

0.017 at 0.05 level of significance. However, with the r coefficient as
-0.180, implying that there is a less negative correlation between Paid up
capital and Likelihood of occurrence of Market Risk. When paid up
capital increases, the Likelihood of occurrence of Market Risk decreases.
This might be because the Business Houses responded to this survey may
have well defined Marketing strategies that enable them to reduce the
Likelihood of occurrence of Market Risk.
4.3.1 d) The p value for Treasury Risk is 0.542, which is greater

than 0.05, at 5% level of significance. So null hypothesis is accepted.
There is no relationship between Paid up capital and Likelihood of
occurrence of Treasury Risk.
4.3.1 e) For Regulatory Risk, the p value is 0.031 at 0.05 level of

significance. The r coefficient is 0.162. Here null hypothesis is rejected,
because the p value is less than 0.05. This means, there is a relationship
between Regulatory Risk and Likelihood of occurrence of Regulatory
Risk. They are less positively correlated. When paid up capital increases,
the Regulatory Risk also increases. The result is logical, because when
the company size grows, the Regulatory measures that have to be taken
increases.
126

4.3.1 f) In case of IT Risk the p value is 0.933, at 0.05 level of
significance which is found to be statistically insignificant. Hence null
hypothesis is accepted. Therefore there is no relationship between
Likelihood of occurrence of IT Risk and paid up capital.
4.3.1 g) Strategic Risk is found to be statistically significant with p

value 0.004 at 0.01 level of significance. A definite negative correlation
was found with r coefficient -0.216. In other words, when paid up capital
increases, the Likelihood of occurrence of Strategic Risk decreases.
4.3.1 h) The r coefficient for Environmental Risk is 0.076, with p

value 0.315, which is greater than 0.05 at 0.05 level of significance. In
this case, null hypothesis is accepted and it is concluded that there is no
relationship between Paid up capital and Likelihood of occurrence of
Environmental Risk.
4.3.1 i) In case of Likelihood of occurrence of Operational Risk,

the p value is 0.383, which is statistically insignificant at 0.05 level of
significance. Hence null hypothesis is accepted and therefore there is no
correlation between Paid up Capital and Likelihood of occurrence of
Operational Risk.
4.3.1 j) The p value for Reputational Risk is 0.873, which is greater

than 0.05 at 0.05 level of significance. Hence null hypothesis is accepted
and there is no relationship between paid up capital and Likelihood of
occurrence of Risk.
4.3.1 k) The r coefficient for Political Risk is 0.059, with p value

0.436, which is greater than 0.05 at 0.05 level of significance. Therefore,
null hypothesis is accepted and there is no relationship between paid up
capital and Likelihood of occurrence of political Risk.
127

4.3.1 l) In case of Likelihood of occurrence of Natural Hazard
Risk, the p value is 0.869, which is statistically insignificant at 0.05 level
of significance. Hence null hypothesis is accepted and therefore there is
no correlation between Paid up Capital and Likelihood of occurrence of
Natural Hazard Risk.
4.3.1 m) The p value for Human capital Risk is 0.008, which is less
than 0.01 at 0.01 level of significance. Therefore, null hypothesis is
rejected and it is stated that there is relationship between paid up capital
and Likelihood of occurrence of Human capital Risk. There is a definite
positive relationship between Likelihood of occurrence of Human Capital
and paid up capital with r coefficient 0.200. In other words, when paid up
capital increases, the Likelihood of occurrence of Human capital Risk
increases.
4.3.1 n) From the table 4.3.1, it is inferred that the p value for
Industry Risk is 0.045, which is found to be statistically significant at
0.05 level of significance. Null hypothesis is rejected and it is stated that
there is a relationship between paid up capital and Likelihood of
occurrence of Industry Risk. The less negative relation with r coefficient
-0.152 between paid up capital and Likelihood of occurrence of Industry
Risk indicated that Industry Risk decreases, when paid up capital
increases.
128

4.3.2 RELATIONSHIP BETWEEN PAID UP CAPITAL AND
IMPACT OF OCCURRENCE OF RISKS
The relationship between the paid up capital and the impact of

occurrence of different risk categories were tested using Pearson
correlation.
The following hypothesis was formulated to test the relationship

between the Impact of occurrence of Risk and Paid up capital at 0.05
level of significance. If the p value is greater than 0.05, null hypothesis is
accepted and it is concluded that there is no relationship between paid up
capital and Impact of Occurrence means of specific risk. If the p value is
less than 0.05, null hypothesis is rejected and it is inferred that there is
relationship between Paid up capital and Impact of occurrence of specific
risk If the results are not significant further analysis were not made.
H05: No relationship exists between paid up capital and Impact of

Occurrence of a. Credit Risk, b. Financing, c. Market Risk Treasury Risk,
d. Regulatory Risk, e. IT Risk, f. Strategic Risk, g. Environmental Risk,
h. Operational Risk, i. Reputational Risk, k. Political Risk, l. Natural
Hazard Risk, m. Human Capital Risk and n. Industry Risk.
129

TABLE 4.3.2 CORRELATION BETWEEN IMPACT OF
OCCURRENCE AND PAID UP CAPITAL
Remarks/
Impact of Pearson Nature of p
S.No. Level of
Occurrence Correlation correlation value
Significance
1 Credit 0.053 Less 0.486 Not significant
2 Financing 0.039 Less 0.606 Not significant
3 Market -0.163 Less 0.031 0.05
4 Treasury -0.029 Less 0.704 Not significant
5 Regulatory 0.146 Less 0.053 Not significant
6 IT -0.035 Less 0.649 Not significant
7 Strategic -0.126 Less 0.095 Not significant
8 Environmental -0.027 Less 0.719 Not significant
9 Operational 0.068 Less 0.370 Not significant
10 Reputational -0.086 Less 0.259 Not significant
11 Political 0.187 Less 0.013 0.05
12 Natural Hazard 0.078 Less 0.304 Not significant
13 Human Capital 0.175 Less 0.020 0.05
14 Industry -0.100 Less 0.188 Not significant
4.3.2 a) The r coefficient for Credit Risk is 0.053, with p value

0.486, which is greater than 0.05 at 0.05 level of significance. In this
relationship between Paid up capital and impact of occurrence of Credit
Risk.
4.3.2 b) The p value for Financing Risk is 0.606, which is greater

than 0.05, at 0.05 level of significance. Therefore, null hypothesis is
130

accepted. There is no relationship between Paid up capital and impact of
occurrence of Financing Risk.
4.3.2 c) For Market Risk, the p value is 0.031 at 5% level of

significance. However, with the r coefficient as -0.163, implying that
there is a less negative relationship between Paid up capital and impact of
occurrence of Market Risk. This means, when paid up capital increases,
the impact of occurrence of Market Risk decreases to minimum extent.
4.3.2 d) In case of impact of occurrence of Treasury Risk, the p

value is 0.704, which is statistically insignificant at 0.05 level of
significance. Hence null hypothesis is accepted and therefore there is no
correlation between paid up capital and impact of occurrence of Treasury
Risk.
4.3.2 e) Regulatory Risk is found to be statistically insignificant

with p value 0.053 at 0.05 level of significance (p>0.05). Hence null
hypothesis is accepted and therefore there is no relationship between paid
up capital and impact of occurrence of Regulatory Risk.
4.3.2 f) In case of IT Risk the p value is 0.649, at 0.05 level of

significance. Hence null hypothesis is accepted. Therefore there is
no relationship between impact of occurrence of IT Risk and paid up
capital.
4.3.2 g) The p value for Strategic Risk is 0.095 at 0.05 level of

significance. The p value is greater than 0.05, which leads to the
acceptance of null hypothesis. Therefore, there is no relationship between
paid up capital and impact of occurrence of Strategic Risk.
4.3.2 h) It is observed from the Table 4.3.2, that the p value of

Environmental Risk is 0.719. The p value is greater than 0.05, at 0.05
131

level of significance. Hence null hypothesis is accepted and it is
concluded that there is no relationship between paid up capital and impact
of occurrence of Environmental Risk.
4.3.2 i) It is understood that the Operational Risks, p value is

0.370, which is greater than 0.05 at 0.05 level of significance. Hence null
hypothesis is accepted and therefore there is no correlation between paid
up capital and impact of occurrence of Operational Risk.
4.3.2 j) The p value for Reputational Risk is 0.259, which is greater

than 0.05 at 0.05 level of significance. Hence null hypothesis is accepted
and there is no relationship between paid up capital and impact of
occurrence of Risk.
4.3.2 k) The r coefficient for Political Risk is 0.187, with p value

0.013, which is less than 0.05 at 0.05 level of significance. Therefore, null
hypothesis is rejected. The r coefficient value indicates that there is less
positive correlation between paid up capital and impact of occurrence of
political Risk. This means when the paid up capital increases, the impact
of occurrence of political Risk increases
4.3.2 l) In case of impact of occurrence of Natural Hazard Risk, the

p value is 0.304, which is greater than 0.05 at 0.05 level of significance.
Null hypothesis is accepted and there is no relationship between paid up
capital and the impact of occurrence of Natural Hazard Risk.
4.3.2 m) The p value for Human capital Risk is 0.020, which is less
than 0.05 at 0.05 level of significance. Therefore, null hypothesis is
rejected and it is concluded that there is relationship between paid up
capital and impact of occurrence of Human Capital Risk. There is a
positive relationship between impact of occurrence of Human Capital and
132

paid up capital with r coefficient of 0.175. In other words, when paid up
capital increases, the impact of occurrence of Human Capital Risk
increases.
4.3.2 n) From the table 4.3.2, it is inferred that the p value for
Industry Risk is 0.188, which is found to be statistically insignificant at
0.05 level of significance. Null hypothesis is accepted and it is stated that
there is no relationship between paid up capital and impact of occurrence
of Industry Risk.
133

4.3.3 RELATIONSHIP BETWEEN PAID UP CAPITAL AND RISK
SCORE
Correlation is used to test the relationship between two or more

variables. Hence to test the relationship between Paid up capital and Risk
score, correlation was used.
The following hypothesis was formulated to test the relationship between

the Risk score and Paid up capital at 0.05 level of significance. If the p
value is greater than 0.05, null hypothesis is accepted and it is concluded
that there is no relationship between paid up capital and Risk score of
specific risk. If the p value is less than 0.05, null hypothesis is rejected
and it is inferred that there is relationship between Paid up capital and
Risk score of specific risk If the results are not significant further
analysis were not made.
H06: No significant relationship exists between paid up capital

and the Risk score of a. Credit Risk, b. Financing Risk, c. Market Risk
Risk.
134

TABLE 4.3.3 CORRELATION BETWEEN PAID UP EQUITY
CAPITAL AND RISK SCORE
Pearson Nature of p Remarks/Level

S.No. Risk Score
Correlation correlation value of Significance
1 Credit 0.045 Less 0.550 Not significant
2 Financing 0.042 Less 0.583 Not significant
3 Market -0.172 Less 0.022 0.05
4 Treasury -0.048 Less 0.527 Not significant
5 Regulatory 0.234 Definite 0.002 0.01
6 IT -0.033 Less 0.668 Not significant
7 Strategic -0.175 Less 0.020 0.05
8 Environmental 0.013 Less 0.865 Not significant
9 Operational 0.078 Less 0.303 Not significant
10 Reputational -0.070 Less 0.355 Not significant
11 Political 0.167 Less 0.027 0.05
Natural
12 0.022 Less 0.770 Not significant
Hazard
13 Human
0.292 Definite 0.000 0.01
Capital
14 Industry -0.103 Less 0.173 Not significant
4.3.3 a) In case of Credit Risk, the p value is 0.550, which is

statistically insignificant at 1% and 5% level of significance. Hence null
hypothesis is accepted and therefore there is no correlation between Paid
up Capital and Credit Risk score.
135

4.3.3 b) Financing Risk is found to be statistically insignificant
with p value 0.583 at 5% level of significance. There is no relationship
between paid up capital and Financing Risk score.
4.3.3 c) In case of Market Risk the p value is 0.022, which is less

than 0.05, at 5% level of significance. Therefore, null hypothesis is
rejected and there is a relationship between paid up capital and Market
Risk score. However, with r coefficient identified as -0.172 and hence
negative correlation was found. This means that when paid up increases,
the Market Risk score decreases.
4.3.3 d) The p value for Treasury Risk is 0.527 at 5% level of

significance. The p value is greater than 0.05, which leads to the
acceptance of null hypothesis. Therefore, there is no relationship between
paid up capital and Treasury Risk score.
4.3.3 e) It is observed from the Table 4.3.3, that the p value of

Regulatory Risk is 0.002. The p value is less than 0.01, at 1% level of
significance. Hence null hypothesis is rejected and it is concluded that
there is no relationship between paid up capital and Regulatory Risk. The
r coefficient is 0.234, a positive correlation indicated that when the size of
the company increases in terms of paid up capital, the Regulatory Risk
also increases.
4.3.3 f) It is understood that the IT Risks, p value is 0.668, which

is greater than 0.05 at 5% level of significance. Hence null hypothesis is
accepted and therefore there is no correlation between Paid up Capital
and IT Risk.
4.3.3 g) The calculated p value for Strategic Risk is 0.020, which is

less than 0.05 at 5% level of significance. Hence null hypothesis is
136

rejected and there is relationship between paid up capital and Strategic
Risk. The r coefficient -0.175 indicates a negative correlation. In other
words, when paid up capital increases, the strategic Risk score decreases.
This might be because the companies have well formulated and defined
strategies to tackle the strategic Risk.
4.3.3 h) The table 4.3.3 indicates that the p value for

Environmental Risk is 0.865, which is greater than 0.05 at 5% level of
significance. Therefore, null hypothesis is accepted and there is no
correlation between paid up capital and Environmental Risk.
4.3.3 i) In case of Operational Risk, the p value is 0.303, which is

statistically insignificant at 1% and 5% level of significance. Hence null
hypothesis is accepted and therefore there is no correlation between Paid
up Capital and Operational Risk.
4.3.3 j) The r coefficient for Reputational Risk is -0.070, with p

value 0.355, which is greater than 0.05 at 5% level of significance. In this
relationship between Paid up capital and Reputational Risk.
4.3.3 k) Political Risk, is statistically significant with the p value

0.027 at 5% level of significance. However, with the r coefficient as
0.167 implies that there is a positive correlation between Paid up capital
and Political Risk. This means, when paid up capital increases, the
Political Risk score increases.

greater than 0.05, at 5% level of significance. Therefore, null hypothesis
is accepted. There is no relationship between Paid up capital and Natural
Hazard Risk.
137

4.3.3 m) In case of Human Capital Risk, the calculated p value is
0.000 at 1 % level of significance. The r coefficient is 0.292. Hence null
hypothesis is rejected, because the p value is less than 0.05. This means
that there is a relationship between paid up capital and Human capital
Risk. They are positively correlated. When paid up capital increases, the
Human Capital Risk also increases.
4.3.3 n) In case of Industry Risk, the p value is 0.173, which is

greater than 0.05, at 5% and 1% level of significance. Therefore, null
hypothesis is accepted and there is no relationship between Industry Risk
score and paid up capital.
138

4.4 ANALYSIS OF VARIANCE
4.4.1 TESTING THE MEAN SCORE OF LIKELIHOOD OF

OCCURRENCE OF RISKS BASED ON NATURE OF INDUSTRY
Nature of industry will have definite influence on the Likelihood

Occurrence of Risks and mean values of the risk. To test the above
assumption, the researcher has identified one way ANOVA to test the
following null hypothesis.
H07: No difference exists among the mean scores of likelihood of
occurrence of Credit Risk, Financing Risk, Market Risk, Treasury Risk,
Regulatory Risk, IT Risk Strategic Risk, Environmental Risk,
Operational Risk, Reputational Risk, Political Risk, Natural Hazard Risk,
Human Capital Risk and Industry Risk on nature of industry.
The mean values of Likelihood Occurrences of Risks of all seven
industries were compared and tested by using one way ANOVA. When
the calculated ANOVA value is lower than the table value at 0.05 level of
significance and p value >0.05, null hypothesis is accepted and it is
concluded that that there is no difference among all the industries in the
Likelihood Occurrence of specific risk. If calculated value of the
ANOVA is higher than the table value and p value <0.05, the null
hypothesis is rejected and the alternate hypothesis of that there is
difference in Likelihood Occurrences of Risks among different industries
on the specific risk measure is accepted. Wherever null hypotheses were
rejected, it is proved that there is significant difference in the mean score
of the Likelihood Occurrence of Risk based on the nature of industry.
When there is significant difference, the mean values were taken into
account for pictorial presentation.
Table 4.4.1 is constructed with F and p values, at 0.05 level of
significance, for different types of risks.
139

TABLE 4.4.1 ANALYSIS OF VARIANCE VALUES FOR
COMPARING THE LIKELIHOOD OF OCCURRENCE OF RISK
BASED ON INDUSTRIES
Likelihood of Occurrence of p Remarks/ Level of

S.No. F
Risk value significance
1 Credit 2.238 0.042 0.5
2 Financing 0.426 0.861 Not significant
3 Market 0.854 0.530 Not significant
6 IT 0.813 0.561 Not significant
7 Strategic 0.811 0.563 Not significant
8 Environmental 0.438 0.853 Not significant
10 Reputational 0.624 0.711 Not significant
11 Political 0.603 0.728 Not significant
12 Natural Hazard 0.468 0.831 Not significant
13 Human Capital 1.334 0.245 Not significant
14 Industry 0.539 0.778 Not significant
4.4.1 a) Credit Risk: For Credit Risk, the calculated F value

2.238 is higher than the table value 2.10 at 0.05 level of significance.
The calculated p value 0.042 is lower than 0.05 and hence the null
hypothesis of that there is no variation among the industries in terms of
Likelihood occurrence of Credit Risk is rejected and the alternate
hypothesis of that there exists variation among the industries of
140

Likelihood Occurrence of Credit Risk is established. The mean score
of the Likelihood of different risks across industries is plotted in Figure
4.4.1(pp.145).
4.4.1 b) Financing Risk: For Financing Risk, the calculated F

value 0.426 is lower than the table value 2.10 at 0.05 level of
significance. The p value 0.861 is higher than 0.05 and hence the null
Likelihood occurrence of Financing Risk is accepted. Likelihood
Occurrence of Financing Risks is mostly uniform for all industries
because mostly it is non diversifiable risk.
4.4.1 c) Market Risk: In the case of Market Risk, the calculated

F value 0.854 is lower than the table value 2.10 at 0.05 level of
Likelihood occurrence of Market Risk is accepted. Market Risk is being a
systematic risk affects all the industries together and hence there is no
difference because of the industry is proved.
4.4.1 d) Treasury Risk: For Treasury Risk, the calculated F value

0.647 is lower than the table value 2.10 at 0.05 level of significance. The
p value 0.693 is higher than 0.05 and hence the null hypothesis of that
there is no variation among the industries in terms of Likelihood
occurrence of Treasury Risk is accepted. The occurrence of Treasury
Risk is similar for all sectors, because the operating exposure would have
been similar.
4.4.1 e) Regulatory Risk: For Regulatory Risk, the calculated F

141

Likelihood occurrence of Regulatory Risk is accepted. The Regulatory
measure for all companies listed in Bombay Stock Exchange is similar.
Because of this homogeneity in their characteristics of Regulatory
measures, the Likelihood Occurrence of Regulatory Risk does not vary
according to the nature of the industry.
4.4.1 f) Information Technology Risk: In the case of IT Risk , the

calculated F value 0.813 is lower than the table value 2.10 at 0.05 level of
Likelihood occurrence of Information Technology Risk is accepted. This
may be due to Informational Technology plays a crucial role for all the
companies, irrespective of the type of sector they belong to.
4.4.1 g) Strategic Risk: For Strategic Risk, the calculated F value

occurrence of Strategic Risk is accepted. The Likelihood Occurrence of
Strategic Risk is uniform across all the industries because the sample
companies selected might have well defined strategic plan.
4.4.1 h) Environmental Risk: For Environmental Risk, the

Likelihood occurrence of Environmental Risk is accepted. Environmental
Risk is the risk which affects all the industries together and hence the
occurrence of Environmental Risk is similar irrespective of the nature of
industry.
142

4.4.1 i) Operational Risk: In the case of Operational Risk, the
Likelihood occurrence of Operational Risk is accepted. Operational Risk
is the risk which affects all the industries together and hence the
occurrence of Operational Risk is similar irrespective of the nature of the
industry.
4.4.1 j) Reputational Risk: For Reputational Risk, the calculated

Likelihood occurrence of Reputational Risk is accepted. The probability
occurrence of Reputational Risk does not differ from industry to industry
because, when the years of existence of the sample companies selected
were probed it is found that majority of the industries existed for more
than 10 years. Over the years they would have built reputation for
survival. Since the industries are maintaining homogeneous
characteristics in terms of years of existence, the Likelihood Occurrence
of Regulatory Risk does not vary.
4.4.1 k) Political Risk : For Political Risk, the calculated F value

occurrence of Political Risk is accepted. The occurrence of political risk
is similar irrespective of the type of industry, because risks related to
change in government, public policy, political interferences are common
for all industries.
143

4.4.1 l) Natural Hazard Risk: For Natural Hazard Risk, the
Likelihood occurrence of Natural Hazard Risk is accepted. The
probability of occurrence of Natural Hazard Risk like Earthquakes,
Tsunami, Floods and Windstorms will not vary on nature of industry
because it is a risk caused by nature.
4.4.1 m) Human Capital Risk: For Human Capital Risk, the

Likelihood occurrence of Human Capital Risk is accepted. Probably the
Human capital policies would have been similar for all the covered
industries.
4.4.1 n) Industry Risk: For Industry Risk, the calculated F value

occurrence of Industry Risk is accepted. Industrial Risk is the risk which
affects all the industries together and hence the occurrence of Industrial
risk is similar irrespective of the nature of the industry.
144

FIGURE 4.4.1 MEAN VALUES OF LIKELIHOOD OF OCCURRENCE OF CREDIT RISK BASED ON NATURE
OF INDUSTRY
145

From the Figure 4.4.1 it is understood that Construction industry
faces high Likelihood occurrence of Credit Risk. Credit Risk differs
for different industries because of the characteristic nature of industry in
terms of Credit Risk. Credit Risk was highest for construction industry
may be because of drop in announcement of new projects by private
sector due to Credit Risk, land acquisition etc. The same reasons were
identified in similar case by Wang Fei, Wang Shilei and Guo Yan study
in 2010. Manufacturing industry has the lowest Credit Risk because of
constituents of Credit Risk which includes counterparty risk, settlement
risk and concentration risk affected leastly, due to high standardization of
Credit policies.
146

4.4.2 TESTING THE MEAN SCORE OF IMPACT OF
OCCURRENCE OF RISKS BASED ON NATURE OF INDUSTRY
To test whether Nature of Industry has definite influence on the

Impact of Occurrence of Risks, One way ANOVA was used. The
formulated hypotheses were given below.
H08: No difference exists among the mean scores of Impact of

occurrence of Credit Risk, Financing Risk, Market Risk, Treasury Risk,
Regulatory Risk, IT Risk, Strategic Risk, Environmental Risk,
Operational Risk, Reputational Risk, Political Risk, Natural Hazard Risk,
Human Capital Risk and Industry Risk on nature of industry.
The mean values of Impact of Occurrences of Risks of all seven

industries were compared and tested by using one way ANOVA. When
the calculated ANOVA value is lower than the table value at 0.05 level of
Impact of Occurrence of specific risk. If calculated value of the ANOVA
is higher than the table value and p value <0.05, the null hypothesis is
rejected and the alternate hypothesis of that there is difference in Impact
of Occurrences of Risks among different industries on the specific risk
measure is accepted. Wherever null hypotheses were rejected, it is proved
that there is significant difference in the mean scores of the Impact of
Occurrence of Risk based on the nature of industry. When there is
significant difference, the mean values were taken into account for
pictorial presentation.

147

TABLE 4.4.2 COMPARING THE MEAN VALUE OF IMPACT OF
OCCURRENCE OF RISK BASED ON INDUSTRIES
Impact of occurrence of Remarks/ Level

S.No. F p value
Risk of Significance
1 Credit 2.367 0.032 0.05
2 Financing 0.690 0.658 Not Significant
3 Market 1.474 0.190 Not Significant
4 Treasury 1.174 0.322 Not Significant
5 Regulatory 0.628 0.708 Not Significant
6 IT 0.936 0.471 Not Significant
7 Strategic 0.696 0.653 Not Significant
8 Environmental 0.393 0.883 Not Significant
9 Operational 1.009 0.421 Not Significant
10 Reputational 0.833 0.546 Not Significant
11 Political 1.069 0.383 Not Significant
12 Natural Hazard 2.663 0.017 0.05
13 Human Capital 4.092 0.001 0.05
14 Industry 0.807 0.565 Not Significant
4.4.2 a) Credit Risk: For Credit Risk, the calculated F value

2.367 is higher than the table value 2.10 at 0.05 level of significance.
The p value 0.032 is lower than 0.05 and hence the null hypothesis of
that there is no variation among the industries in terms of Impact of
occurrence of is rejected and the alternate hypothesis of that there
exists variation among the industries of Impact of Occurrence of
148

Credit Risk is established. The mean scores of the Impact of Occurrence
of across different industries were plotted in Figure 4.4.2 a (pp.153).

Impact of occurrence of Financing Risk is accepted. The Likelihood of
Occurrence of Financing Risk also followed the same pattern in the table
no. 4.4.1.
4.4.2 c) Market Risk: In the case of Market Risk, the calculated F

Impact of occurrence of Market Risk is accepted.
4.4.2 d) Treasury Risk: For Treasury Risk , the calculated F value

there is no variation among the industries in terms of Impact of
occurrence of Treasury Risk is accepted.

Impact of occurrence of Regulatory Risk is accepted.

149

Impact of occurrence of Information Technology Risk is accepted.
occurrence of Strategic Risk is accepted.

Impact of occurrence of Environmental Risk is accepted..

Impact of occurrence of Operational Risk is accepted.

Impact of occurrence of Reputational Risk is accepted. The Likelihood
Occurrence of Regulatory Risk also follows the same pattern.

150

occurrence of Political Risk is accepted.

calculated F value 2.663 is higher than the table value 2.10 at 0.05 level
of significance. The p value 0.017 is higher than 0.05 and hence the null
Impact of occurrence of Natural Hazard Risk is rejected and the
alternate hypothesis of that there exists variation among the
industries of impact of occurrence of Natural Hazard Risk is
established. The mean scores of the Impact of Occurrence of Natural
Hazard across different industries were plotted in Figure 4.4.2 b (pp.155).
4.4.2 m) Human Capital Risk: For Human capital Risk, the

of significance. The p value 0.001 is lower than 0.05 and hence the null
Impact of occurrence of Human Capital Risk is rejected and the
alternate hypothesis of that there exists variation among the
industries of impact of occurrence of Human Capital Risk is
established. The mean scores of the Impact of Occurrence of Human
Capital Risk across different industries were plotted in Figure 4.4.2 c
(pp.157).

occurrence of Industry Risk is accepted.
151

The null hypothesis of no difference among the mean scores of
Likelihood of occurrence of Financing Risk, Market Risk, Treasury Risk,
Regulatory Risk, IT Risk, Strategic Risk, Environmental Risk,
Operational Risk, Reputational Risk, Political Risk, and Industry Risk is
accepted and these risks are following the same pattern of mean of the
Likelihood Occurrence of risk. Therefore the same reasons can be
extended to the Impact of Occurrence of risks which is presented in 4.4.1.
152

FIGURE 4.4.2 a MEAN VALUE OF IMPACT OF OCCURRENCE OF CREDIT RISK BASED ON NATURE OF
INDUSTRY
153

From the Figure 4.4.3 a, it is understood that Construction
industry faces high Impact of occurrence of Credit Risk. It was also
founded that Likelihood of Occurrence of Credit Risk was high for the
Construction sector from the figure 4.4.1.
154

FIGURE 4.4.2 b MEAN VALUES OF IMPACT OF OCCURRENCE OF NATURAL HAZARD RISK BASED ON
NATURE OF INDUSTRY
155

When the mean scores of Natural Hazard Risks were plotted on a
graph (Figure 4.4.2 b), it shows that impact of occurrence of Natural
Hazard Risk is high for Resources sector. The impact of Likelihood
Occurrence of Natural hazard Risk varies on Resource sector, because of
the characteristic nature of the industry in terms of Natural Hazard Risk.
156

FIGURE 4.4.2 C MEAN VALUES OF IMPACT OF OCCURRENCE OF HUMAN CAPITAL RISK BASED ON
NATURE OF INDUSTRY
157

The figure 4.4.2 c depicts the mean values of impact of
occurrence of Human Capital across different sectors. From the figure,
it is implicit that the impact of occurrence of Human capital Risk is high
in Resources sector when compared to other sectors. The impact of
occurrence of Human capital Risk is low in FMCG sector. This may be
due to non availability of experienced talent in our country which is a
major challenge before Resources sector. These findings coincides with
the earlier study conducted by Desai, 2010.The result that there is
shortage of workers especially in the age group of 30 to 45 years
coincides with the above.
158

4.4.3 TESTING THE MEAN SCORE OF DIFFERENT TYPES OF
RISKS BASED ON NATURE OF INDUSTRY
Nature of industry will have definite influence on the Risk score

and mean values of the risk. To test the above assumption, the researcher
has identified one way ANOVA to test the following null hypotheses.
H09: No difference exists among the mean scores of Credit Risk,

Financing Risk, Market Risk, Treasury Risk, Regulatory Risk, IT Risk,
Strategic Risk, Environmental Risk, Operational Risk, Reputational Risk,
Political Risk, Natural Hazard Risk, Human Capital Risk and Industry
Risk Scores on nature of industry.
The mean values of different Risk scores of all seven industries

were compared and tested by using one way ANOVA. When the
calculated ANOVA value is lower than the table value at 0.05 level of
Risk score of specific risk. If calculated value of the ANOVA is higher
than the table value and p value <0.05, the null hypothesis is rejected and
the alternate hypothesis of that there is difference in Risk scores among
different industries on the specific risk measure is accepted. Wherever
null hypotheses were rejected, it is proved that there is significant
difference in the mean Risk scores based on the nature of industry. When
there is significant difference, the mean values were taken into account
for pictorial presentation.

159

TABLE 4.4.3 COMPARING THE MEAN VALUE OF RISK
SCORES BASED ON INDUSTRIES (ANOVA)
Remarks/ Level of
S.No. Risk Score F p value
significance
1 Credit 3.039 0.008 0.05
2 Financing 0.711 0.641 Not significant
3 Market 1.112 0.357 Not significant
6 IT 0.729 0.627 Not significant
7 Strategic 1.051 0.394 Not significant
8 Environmental 0.360 0.903 Not significant
10 Reputational 0.853 0.531 Not significant
11 Political 0.559 0.763 Not significant
12 Natural Hazard 1.257 0.280 Not significant
13 Human Capital 2.878 0.011 0.05
14 Industry 0.542 0.776 Not significant
4.4.3 a) Credit Risk: For , the calculated F value 3.039 is higher

than the table value 2.10 at 0.05 level of significance. The p value 0.008
is lower than 0.05 and hence the null hypothesis of that there is no
variation among the industries in terms of Credit Risk score is rejected
and the alternate hypothesis of that there exists variation among the
industries of Credit Risk score is established. The variation among the
industries in terms of Likelihood Occurrence of Credit Risk and Impact
160

of Occurrence of Credit Risk was noticed form the table 4.4.1 and 4.4.2.
Risk score is the product of Likelihood occurrence of risk and Impact of
risk. Since the Likelihood Occurrence of Credit Risk and Impact of Credit
Risk varies according to the industry, the variation among the industries
in terms of Credit Risk score is substantiated. The mean scores of Credit
Risk were plotted on the graph 4.4.3 a (pp.165).

Financing Risk score is accepted.
4.4.3 c) Market Risk: In the case of Market Risk, the calculated F

Market Risk score is accepted.
4.4.3 d) Treasury Risk: For Treasury Risk , the calculated F value

there is no variation among the industries in terms of Treasury Risk
score is accepted.

Regulatory Risk score is accepted.
161

Information Technology Risk score is accepted.

there is no variation among the industries in terms of Strategic Risk score
is accepted.

Environmental Risk score is accepted.

Operational Risk score is accepted.

Reputational Risk score is accepted.
162

there is no variation among the industries in terms of Political Risk score
is accepted.

Natural Hazard Risk score is accepted.
4.4.3 m) Human Capital Risk: For Human Capital Risk, the

of significance. The p value 0.011 is lower than 0.05 and hence the null
Human Capital Risk score is rejected and the alternate hypothesis of
that there exists variation among the industries of Human Capital
Risk score is established. The variation among the industries in terms of
Likelihood Occurrence of Human Capital Risk and Impact of Occurrence
of Human Capital Risk was noticed form the table 4.4.1 and 4.4.2. Risk
score is the product of Likelihood occurrence of risk and Impact of risk.
Since the Likelihood Occurrence of Human Risk and Impact of Human
Capital Risk varies according to the industry, the variation among the
industries in terms of Human Capital Risk score is substantiated. The
mean scores of the Human Capital Risk were plotted in the
graph 4.4.3 b (pp.167).

163

there is no variation among the industries in terms of Industry Risk score
is accepted.
It is noted from the table 4.4.3, the risk score means of Credit Risk
and Human Capital Risk differs among industrial sectors at the 0.05 level
of significance. Other risk categories had no significant differences in
their risk score means among different sectors. It is worth mentioning that
the same results were found when testing the Likelihood and Impact of
Occurrences of different Risk categories among industries. The same
interpretation for not being significant as presented in table 4.4.1 and
4.4.2 applies for the risk score means.
164

FIGURES 4.4.3 a MEAN VALUES OF CREDIT RISK SCORE BASED ON NATURE OF INDUSTRY
165

From the Figure 4.4.3 a it is understood that Construction Industry
faces high Credit Risk. The Likehood Occurrence of Credit Risk and
Impact of Occurrence of Credit Risk was found to be high from figure
4.4.1 and 4.4.2 a. Since Credit Risk score is the product of Likelihood
Occurrence of Credit Risk and Impact of Occurrence of Credit Risk, the
same reasons presented for figure 4.4.1 can be extended here also.
166

FIGURE 4.4.3 b MEANS VALUES OF HUMAN CAPITAL RISK SCORE BASED ON NATURE OF INDUSTRY
167

From the figure 4.4.3 b it is noted that the Resources Sector faces
high Human Capital Risk. It was found from the figure 4.4.2 c the Impact
of Occurrence of Human Capital Risk is high in Resources Sector.
Therefore the same reasons quoted in the figure 4.4.2 c can be extended
to Human Capital Risk being high in Resources Sector.
168

4.4.4 TESTING THE MEAN VALUE OF OVERALL RISK SCORE
BASED ON SIZE OF THE COMPANY IN TERMS OF
EMPLOYEES
Overall Risk Score is the Sum (R1, R2, R3, R4, R5, R6, R7, R8,
R9, R10, R11, R12)
Where R1= Credit Risk Score, R2 = Financing Risk Score, R3=

Market Risk Score, R4 =Treasury Risk Score, R5= Regulatory Risk
Score, R6= IT Risk score, R7= Strategic Risk score, R7= Environmental
Risk score, R8= Operational Risk score, R9= Reputational Risk score,
R10= Political Risk score, R11= Human capital Risk score, R12=
Industry Risk score.
ORS = Sum(R1,R2,R3,R4,R5,R6,R7,R8,R9,R10,R11,R12,)
169

TABLE 4.4.4.1 RISK SCORE AND SIZE OF THE COMPANY IN
TERMS OF EMPLOYEES
S.No. No of Employees Overall Risk Score Mean
1 < 750 141.41
2 751-1500 159.65
3 1501-2250 163.87
4 > 2250 161.82
The table 4.4.4.1 represents the cross tabulation of Risk score and
Size of the company in terms of employees. The mean value of overall
Risk score ranges from 141.41 to 161.82. It is noticed that companies
with employees in the range of 1501-2250 have the highest overall mean
Risk score of 163.87.
To test to what degree differences exist between the Overall Risk

Score and Size of the company in terms of employees, one way ANOVA
was employed. The computed results are shown in the table 4.4.4.2.
H10: No difference exists among the overall risk score and size of
the company in terms of employees.
170

TABLE 4.4.4.2 ANOVA RESULTS
OVERALL RISK SCORE AND SIZE OF THE COMPANY IN

TERMS OF EMPLOYEES
S.No. Factor F p value
1 Number of
2.974 0.033
Employees
The results show that, significant difference exist in the overall

Risk score based on the size of the company in terms of employees
(f=2.974, p <0.05). In other words it became obvious from the ANOVA
result, that the p value is 0.033, which is less than 0.05.
171

4.4.5 MANAGEMENT OF FOREIGN EXCHANGE RISK TOOLS
AND PAID UP CAPITAL
One Way Analysis of Variance was used to test whether any

significant differences exists in the tools used to manage foreign
exchange risk based on Paid up capital.
H011: No difference exists in the tools used to manage foreign

exchange Risk based on Paid up capital.
Table 4.4.5 MANAGEMENT OF FOREIGN EXCHANGE RISK

TOOLS AND PAID UP CAPITAL
S.No. FACTOR F p value
1 Paid up capital 1.112 0.356
From the table 4.4.5, it is noted that the p value is 0.356 at 5% level
of significance. The p value noted from the table is above 0.05.
Therefore, null hypothesis is accepted. This means, the tools used to
manage foreign exchange Risk does not varies based on the Paid up
Capital.
172

AND SALES
One Way Analysis of Variance was used to test whether any

significant differences exists in the tools used to manage foreign
exchange risk based on Sales.
H012: No difference exists in the tools used to manage Foreign

exchange risk based on sales.

AND SALES
S.No. FACTOR F p value
1 Sales 0.297 0.914
The result of ANOVA shows a p value of 0.914, which is above

0.05. Therefore, null hypothesis is accepted. There is no significant
difference in the tools used to manage foreign exchange risks based on
sales.
173

4.5 TESTING OF OVERALL RISK SCORE MEANS OF RISK
DATABASE OWNERS AND OTHERS
Risk Register database will help the companies to record the

sources, nature of risks it faces. This will definitely help the companies to
decide the strategies to reduce the risks in future. The maintenance of
Risk Register database will have an impact on Overall Risk score, when
compared to the non maintenance of Risk Register Database. To test the
above assumption, the researcher has identified Independent t test to test
the following null hypothesis.
H013: No difference exists between the respondents with and

without Risk register database on Overall Risk score means.
When the p value is > 0.05, null hypothesis is accepted and it is

concluded that there is no significant difference between the respondents
with and without Risk Register database on Overall Risk score means. If
the p value is <0.05, null hypothesis is rejected and it is stated that there
is significant difference between the respondents with and without Risk
Register database on Overall Risk score means.
174

TABLE 4.5.1 LEVENES T TEST FOR EQUALITY OF RISK
SCORE MEANS
S.No. t p value Level of significance
1 3.076 0.003 0.05
Independent t test is used to compare mean values of two different

groups. Here it is used to compare the mean values between the
respondents who have Risk register database and do not. The Levenes T
Test for equality means exhibited at value of 3.076. The p 0.003 is less
than 0.05 (p<0.05). Therefore, null hypothesis is rejected and it is stated
that the there is significant difference between the mean values of Overall
Risk score for respondents with and without Risk register database.
The mean values of Overall Risk score for respondents with and
without Risk Register database has been computed and displayed in Table
4.5.2.
175

TABLES 4.5.2 CROSS TABULATION BETWEEN RISK
REGISTER DATABASE & OVERALL RISK SCORE
Overall Risk Score

S.No. Risk Register Database
Mean N
1 Yes 142.73 52
2 No 164.27 124
It is evident that the Overall Risk score mean value 142.73 for
respondents maintaining Risk register database is less when compared
with the mean value 164.27 for respondents not maintaining Risk register
database. Therefore the findings of that there is significant difference in
the Overall risk score mean values for respondents maintaining Risk
register database and not maintaining Risk register database in the
previous table 4.5.1 is substantiated. The maintenance of Risk register
database will help the companies to record the type of risks it faces and
thereby paves a way to reduce Overall Risk score.
176

4.6 TESTING OF ASSOCIATION
4.6.1 ASSOCIATION BETWEEN CREDIT RISK MEASURING

TOOLS AND NATURE OF INDUSTRY
Chi-square test is used to test the association between two

variables. Here the association between the Credit Risk measuring tool
and nature of industry is tested at 0.05 level of significance. The
following hypothesis was framed for the purpose.
H014: No association exists between Credit Risk measuring tools

and nature of industry.
When the calculated Chi-square value is less than the table value at
0.05 level of significance and p value > 0.05, null hypothesis is accepted
and it is concluded that there is no significant association between Credit
Risk measuring tool and nature of industry. When the calculated Chi-
square value is greater than the table value at 0.05 level of significance
and p value <0.05, null hypothesis is rejected and it is stated that there is
significant association between Credit Risk measuring tools and nature of
industry.
The table 4.6.1.1 represent the cross tabulation between Credit Risk
measuring tool and nature of industry and table 4.6.1.2 represents the
result of chi-square test.
Nature of Industry which includes Automotive, Chemicals, FMCG,

Manufacturing, Resources, IT & Technology and Construction were
grouped into two categories for analysis. This has been done because the
results of cross tabulation between Credit Risk Measuring tool and Nature
of Industry (individual industries) showed frequencies less than 5 for few
cases. One of the conditions for the application of Chi-square test is no
177

group should contain very few items, say less than 5. In case where the
frequencies are less than 5, regrouping is done by combining the
frequencies of adjoining groups so that the new frequencies become
greater than 5. Therefore, Nature of Industry has been regrouped into two
categories to perform Chi-square test of association. Automotive,
Chemicals, Manufacturing and Construction were grouped together and
named as Industry Group I and Resources, FMCG and IT &
Technology were clubbed and named as Industry Group II. The results
of Cross tabulation between Credit Risk Measuring tool and nature of
Industry is displayed in Table 4.6.1.1
TABLE 4.6.1.1 CROSS TABULATION BETWEEN CREDIT RISK

MEASURING TOOL AND NATURE OF INDUSTRY
S.No. Credit Risk Measuring tool Industry Industry

Group I Group 2
1 Sensitivity Analysis 66 (50.8) 19 (41.3)
2 Back Testing 55 (42.3) 21 (45.7)
3 Stress testing 9 (6.9) 6 (13)
4 TOTAL 130 46
Figures in parentheses denotes percentages
From the table 4.6.1.1 it is found that the Majority of the

respondents in Group I uses Sensitivity Analysis as a tool to measure
Credit Risk. Whereas in the case of Group II Majority of the respondents
use Back Testing to measure Credit Risk. In the both the groups least
used tool is Stress testing.
178

TABLE 4.6.1.2 CHI-SQUARE TEST FOR CREDIT RISK
Remarks/ Level
S. No. Chi-square Value p value
of Significance
1 2.212 0.331 Not significant
The calculated Chi-square value 2.212 is less than the table

value 5.991 at 0.05 level of significance. The p value 0.331 is above 0.05
and hence null hypothesis is accepted and it is concluded that there is no
association between Credit Risk measuring tool and nature of industry.
This may be because the type of tool used to measure Credit Risk
depends upon the information systems, knowledge about the metrics
rather than nature of industry.
179

4.6.2 ASSOCIATION BETWEEN MARKET RISK
Chi-square test was used for testing the hypothesis that there exists
an association between Market Risk measuring tool and nature of
industry. The following hypothesis was formulated for the purpose.
H015: No association exists between Market Risk measuring tools

and nature of industry.
and it is concluded that there is no significant association between Market
Risk measuring tool and nature of industry. When the calculated Chi-
square value is greater than the table value at 0.05 level of significance
and p value <0.05, null hypothesis is rejected and it is stated that there is
significant association between Market Risk measuring tools and nature
of industry.
The level of association between Market Risk measuring tool and

nature of industry was tested using Chi square.
The table 4.6.2.1 represent the cross tabulation between Market

Risk measuring tool and nature of industry and table 4.6.2.2 represents
the result of chi-square test.
Nature of Industry which includes Automotive, Chemicals, FMCG,

Manufacturing, Resources, IT & Technology and Construction were
grouped into two categories for analysis. This has been done because the
results of cross tabulation between Market Risk Measuring tool and
Nature of Industry (individual industries) showed frequencies less than 5
for few cases. One of the conditions for the application of Chi-square test
180

is no group should contain very few items, say less than 5. In case where
the frequencies are less than 5, regrouping is done by combining the
frequencies of adjoining groups so that the new frequencies become
greater than 5. Therefore, Nature of Industry has been regrouped into two
categories to perform Chi-square test of association. Automotive,
Chemicals, Manufacturing and Construction were grouped together and
named as Industry Group I and Resources, FMCG and IT &
Technology were clubbed and named as Industry Group II. The results
of Cross tabulation between Market Risk Measuring tool and nature of
Industry is displayed in Table 4.6.1.2
TABLE 4.6.2.1 CROSS TABULATION BETWEEN MARKET RISK

S.No. Market Risk Measuring Industry Industry

tool Group I Group 2
1 Sensitivity Analysis 32 (24.6) 6 (13)
2 Back Testing 38 (29) 21(45.6)
3 Stress testing 60 (46) 19 (41.3)
4 TOTAL 130 46
Figures in parentheses denotes percentages
From the table 4.6.1.1 it is found that the Majority of the

respondents in Group I uses Stress Testing as a tool to measure Market
Risk. Whereas in the case of Group II. Majority of the respondents use
Back Testing to measure Market Risk. In both the groups least used tool
is Sensitivity Analysis.
181

TABLE 4.6.2.2 CHI-SQUARE TEST FOR MARKET RISK
Remarks/
S.No. Chi-square value p value Level of
Significance
1 5.019 0.081 Not significant
The calculated Chi-square value 5.019 is higher than the table

value 5.991 and p value 0.081 is above 0.05 at 0.05 level of significance.
Hence null hypothesis is accepted and it is concluded that there is no
significant association between the Market Risk measuring tools and the
nature of industry. This may be because the type of tool used to measure
Market Risk depends upon the information systems, knowledge about the
metrics rather than nature of industry.
182

4.6.3 ASSOCIATION BETWEEN BUDGETED EXPENSES FOR
RISK MANAGEMENT AND BASIC PROFILE OF THE
RESPONDENTS
Chi-square test of association was utilized to test the presence of

association between budgeted expenses for Risk management activities
and Sales, Nature of Industry, Number of employees and paid up capital.
The following hypotheses were formulated to test the relationship

between Budgeted expenses for Risk management activities and Sales,
Nature of Industry, Number of employees and Paid up capital.
H016: No association exists between Budgeted expenses for Risk

management and
a) Size of the company in terms of sales

b) Size of the company in terms of employees
c) Nature of Industry
d) Paid up Capital.
e) Years of existence.
and it is concluded that there is no significant association between
Budgeted expenses for Risk Management activities and Sales, Nature of
Industry, Number of employees and Paid up capital. When the calculated
Chi-square value is greater than the table value at 0.05 level of
significance and p value <0.05, null hypothesis is rejected and it is stated
that there is significant association between Budgeted expenses for Risk
Management activities and Sales, Nature of Industry, Number of
employees and Paid up capital.
183

TABLE 4.6.3 BUDGETED EXPENSES FOR RISK
MANAGEMENT AND BASIC PROFILE OF THE RESPONDENTS
(CHI SQUARE)
Basic Profile of the Chi-square Level of

S.No. p value
Respondents Value significance
1 Sales 103.1 0.000 0.05
2 Employees 30.75 0.004 0.05
3 Nature of Industry 41.532 0.078 Not significant
4 Paid up capital 39.19 0.006 0.05
5 Years of Existence 15.80 0.395 Not significant
The results of the formulated hypotheses are
4.6.3 a) The calculated Chi-square value 103.10 is greater than the

table value 37.652 and p value 0.000 < 0.05 and hence null hypothesis is
rejected. Therefore there is association between budgeted expenses for
Risk management and size of the company in terms of sales. This is
because the budgeted activity for any industry depends upon the revenue
generated.
4.6.3 b) The calculated Chi-square value 30.75 is greater than the

table value 24.996 and p value 0.004 < 0.005 and hence null hypothesis is
rejected. Therefore there is association between budgeted expenses for
Risk management and size of the company in terms of employees.
Budgeting expenses for risk management includes risk communication,
training given on safety measures to employees, which depends on the
184

number of employees. Therefore the association between budgeted risk
management expenses and number of employees is substantiated.
4.6.3 c) The calculated Chi-square value 41.532 is less than the

table value 43.773 and p value 0.078 > 0.05 and null hypothesis is
accepted. There is no association between budgeted expenses for Risk
management and nature of industry. The type of industry does not
influence the budgeted expenses.
4.6.3 d) The calculated Chi-square value 39.19 is greater than the

table value 31.40 and p value 0.006 < 0.05. Therefore null hypothesis is
rejected and hence the association between Budgeted expenses for Risk
management and paid up capital is established.
4.6.3 e) The calculated Chi-square value 15.80 is less than the table
value 24.996 and p value 0.395 > 0.05 and hence null hypothesis is
accepted. The results of Chi-square test of association reveals that there is
no association between years of existence and budgeted expenses for Risk
management.
185

4.6.4 TESTING THE ASSOCIATION BETWEEN DOCUMENTED
RISK POLICY AND BASIC PROFILE OF THE RESPONDENTS
The association between documented Risk Policy and basic profile

are tested with the help of Chi-square test.

between documented Risk management policy and Sales, Nature of
Industry, Number of employees, paid up capital and Years of existence.
H017: No association exists between documented Risk management

policy and

d) Paid up Capital.
documented Risk Management policy and Sales, Nature of Industry,
Number of employees, Years of existence and Paid up capital. When the
calculated Chi-square value is greater than the table value at 0.05 level of
that there is significant association between documented Risk
Management policy and Sales, Nature of Industry, Number of employees,
Years of existence and Paid up capital.
186

TABLE 4.6.4 DOCUMENTED RISK POLICY AND BASIC
PROFILE OF THE RESPONDENTS (CHI SQUARE)
Basic Profile of the Chi- square Remarks/Level

S.No. p value
Respondents Value of significance
1 Sales 4.528 0.476 Not significant
2 Employees 13.249 0.004 0.05
4 Paid up capital 5.858 0.349 Not significant
4.6.4 a) The calculated Chi-square value 4.528 is less than the table
value 12.59 and p value 0.476 is greater than 0.05 at 0.05 level of
significance and hence null hypothesis that there is no association
between documented Risk management policy and size of the company in
terms of sales is proved. Documentation of Risk policy irrespective of the
quantum of sales is thus proved.

table value 7.815 and p value 0.004 is less than 0.05 at 0.05 level of
significance. In this case the null hypothesis is rejected and therefore
there is association between employees and documented Risk
management policy. Risk policy clearly explains the roles and
responsibilities that have to be carried out by the employees and hence
the association between Number of employees and documented Risk
policy is substantiated.
187

4.6.4 c) The calculated Chi-square value 4.771 is less than the table
value 12.59 and p value 0.688 >0.05 at 0.05 level of significance. The
result shows that it is statistically insignificant. Null hypothesis is
accepted and there is no association between documented Risk
management policy and nature of industry. This is because
documentation of Risk policy is again a pre requisite Risk Management
activity irrespective of the nature of industry.
4.6.4 d) The calculated Chi-square 5.585 is less than the table value
12.59 and p value 0.349 > 0.05 and hence null hypothesis is accepted.
Therefore there is no association between documented Risk Policy and
paid up capital. The same interpretation quoted in 4.6.4 a. for sales is
applicable to paid up capital also.
4.6.4 e) The calculated Chi-square 5.533 is less than the table

value 15.53 and p value 0.137 >0.05 at 0.05 level of significance and
hence null hypothesis is accepted. Therefore there is no association
between documented Risk Policy and years of existence. There is no
association because documentation of Risk policy is pre requisite risk
management activity.
188

4.6.5 TESTING THE ASSOCIATION BETWEEN PRESENCE OF
RISK COMMUNICATION STRATEGY AND BASIC PROFILE
OF THE RESPONDENTS
Chi-square test was used for testing the hypothesis that there exists
an association. The following hypotheses was framed for the purpose
H018: No association exists between presence of organizations

communication strategy and

d) Paid up Capital.
presence of Risk communication strategy and Sales, Nature of Industry,
Number of employees, Years of existence and Paid up capital. When the
calculated Chi-square value is greater than the table value at 0.05 level of
that there is significant association between presence of Risk
communication strategy and Sales, Nature of Industry, Number of
employees, Years of existence and Paid up capital.
189

TABLE 4.6.5 ORGANISATION RISK COMMUNICATION AND
BASIC PROFILE OF THE RESPONDENTS (CHI SQUARE)
S.No. Basic Profile of the Chi-square Level of

p value
Respondents value significance
2 Employees 14.775 0.002 0.05
4 Paid up capital 12.633 0.049 0.05
The results of the formulated hypotheses are
4.6.5 a) The calculated Chi-square value 7.5 is less than the table
value of 12.59 and p value 0.186 is greater than 0.05 at 0.05 level of
significance. The Chi-square test of association result is statistically
insignificant. Hence null hypothesis is accepted and therefore there is no
association between sales and organisation Risk communication strategy.
Risk communication is vital for all types of organisation, irrespective of
the quantum sales is thus proved.

significance. The null hypothesis is rejected and there is association
between Number of employees and Organizations Risk communication
strategy. The roles and responsibilities of the employees documented in
the risk policy have to be communicated to them. Therefore the result of
190

association between the number of employees and presence of
Organisations Risk communication strategy is substantiated.
accepted and there is no association between nature of industry and
organisations Risk communication strategy. Organisations Risk
communication strategy is a vital role in all type of Industry. Therefore
nature of industry does not have any influence on Organisations Risk
communication strategy.
4.6.5 d) The calculated Chi-square 12.633 is greater than the table

value 12.59 and p value 0.049 < 0.05 and hence null hypothesis is
rejected. Hence it is concluded that there is relationship between paid up
capital and organisations Risk communication strategy.

value 15.533 and p value 0.322 > 0.05 at 0.05 level of significance and
between years of existence and organisation Risk communication
strategy.
191

4.6.6 ASSOCIATION BETWEEN RISK REGISTER DATABASE
AND BASIC PROFILE OF THE COMPANY
The association between Risk register database and basic profile

are tested with the help of Chi-square test.

between Risk register database and Sales, Nature of Industry, Number of
employees, paid up capital and Years of existence.
H019: No relationship exists between holding Risk register database

and

d) Paid up Capital.
192

TABLE 4.6.6 RISK REGISTER DATABASE AND BASIC
PROFILE OF THE RESPONDENTS (CHI SQUARE)
Basic profile of the Chi-square Level of

S. No. p value
Respondents Value significance
2 Employees 14.789 0.002 0.05
4 Paid up capital 4.549 0.603 Not significant
4.6.6 a) The calculated Chi-square value 11.023 is less than the

table value 12.59 and p value 0.051 is greater than 0.05 at 0.05 level of
significance and hence null hypothesis is accepted. Therefore there is no
association between Sales and holding Risk register database. This is
because holding Risk Register database helps the company to reduce the
risk in future, irrespective of quantum of sales.

significance. The null hypothesis is rejected and there is association
between Number of employees and Risk register database. Risk Register
database records the source, nature, existing controls.
accepted and there is no association between nature of industry and Risk
193

Register database. This may be due to any type of industry should hold
Risk Register database.
4.6.6 d) The calculated Chi-square 4.549 is less than the table value
12.59 and p value 0.603 >0.05 and hence null hypothesis is accepted.
There is no association between Risk register database and paid up
capital. This may be because irrespective of the paid up capital, industries
should hold Risk Register database to reduce risk in future.

value 15.533 and p value 0.657 > 0.05 at 0.05 level of significance and
established between years of existence and Risk Register database. This
may be due to Risk Register database playing a vital role both for newly
established and old companies.
194

4.7 TESTING OF GROUPING VARIABLES INFLUENCE OVER
TEST VARIABLE (KRUSKAL WALLIS)
4.7.1 RANK GIVEN TO CREDIT RISK MANAGEMENT

TOOLS BASED ON NATURE OF INDUSTRY
There are various tools available to manage Credit Risk. Kruskal

Wallis test was performed to find out whether nature of industry
influences the rank given to the Credit Risk Management tools.
H020: No relationship exists between the Nature of industry and

Credit Risk Management tools.
195

TABLE 4.7.1.1 KRUSKAL WALLIS TEST FOR CREDIT RISK MANAGEMENT TOOLS
Outsourced
Credit Credit agency reports and Debt
Factoring invoiced Derivative
insurance recommendations collection
management
Chi-square 1.614 6.841 4.619 4.986 5.464 6.687

value
p value 0.952 0.336 0.594 0.546 0.486 0.351
196

It is found from the table 4.7.1.1 the calculated Chi-square values
for all the Credit Risk Management tools are less than the table value
11.070 and p values > 0.05. Therefore, Null hypothesis is accepted, which
means that the ranking given to the various Credit Risk management tools
are not influenced by the nature of industry. In other words, irrespective
of the industry, they give similar ranks to the Credit Risk Management
tools.
197

TABLE 4.7.1.2 RANK FOR CREDIT RISK MANAGEMENT
S.No Mean Rank

Credit Risk Management tools Rank
Score
1 Credit insurance 2.97 II
2 Credit agency reports and 2.45 I

recommendations
3 Factoring 3.77 IV
4 Outsourced invoiced management 3.91 V
5 Debt collection 3.43 III
6 Derivative 4.46 VI
The order of importance is understood from the table 4.7.1.2. The

Mean rank scores vary from 2.97 to 4.46. The mean score for Credit
agency reports and recommendation is high and ranked as 1, with the
mean score of 2.45. The next important tool for managing Credit Risk is
Credit insurance with mean score of 2.97 and Rank as 2. The least used
tool in managing Credit Risk is derivatives, with the mean score of 4.46
and this may be due to of the complexity of the instrument. Companies
rely upon Credit agency reports and recommendation because it helps
them to minimize credit exposure in major adverse events.
198

4.7.2 OPERATING RISK MANAGEMENT TOOLS
Kruskal- Wallis test is appropriate for data collected on an ordinal

scale. Kruskal Wallis is One-way analysis of variance by ranks. This is
also called ordinal ANOVA, Kruskal Wallis test of H test. To find
whether the nature of industry influences the type of Operating Risk
management they choose, Kruskal-Wallis test was used.
H021: No relationship exists between the Nature of industry and

operating risk management tools.
199

TABLE 4.7.2.1 OPERATING RISK MANAGEMENT TOOLS KRUSKAL-WALLIS TEST
Operating
Risk Self- Segregation Use of Process Code of Compliance Physical
S.No. Audit Insurance
Management assessment of duties technology Manuals conduct Manuals control
tools
1
Chi-Square 7.943 8.477 7.892 9.354 7.997 5.944 6.443 10.848 4.046
2
p value 0.242 0.205 0.246 0.155 0.238 0.429 0.375 0.093 0.670
200

From the table 4.7.2.1, it is understood that the p values of all the
tools are more than 0.05. Therefore, null hypothesis is accepted. This
means that irrespective of nature of industries, the respondents are giving
similar ranks to the operating Risk management tools. In other words, the
type of respondents does not influence the ranking given to the Operating
Risk Management tools.
The order of importance is understood from the descriptive statistic

table represented below.
TABLE 4.7.2.2 RANKS FOR OPERATING RISK MANAGEMENT

TOOLS
S. No. Operating Risk Management tools Mean Rank Rank
1 Self-assessment 4.28 3
2 Audit 3.31 1
3 Segregation of duties 3.87 2
4 Use of technology 4.96 5
5 Process Manuals 5.21 7
6 Code of conduct 4.82 4
7 Compliance Manuals 5.15 6
8 Physical control 6.32 8
9 Insurance 7.07 9
Overall, mean score and ranks for each of the attributes are
presented in table no 4.7.2.2.It shows that auditing is the most important
tool considered while managing the operating Risks with mean score 3.31
and Rank1. The next important tool comes out to be the segregation of
duties with mean score of 3.87 and rank 2. Self-assessment is ranked as
third important tool with a mean score of 4.28. The least important tool to
201

manage operating Risk is Insurance with mean score of 7.07 and rank as
9. It is surprising to see that insurance as a tool to manage Operating Risk
is given least preference. Since Operational Risk is related to the loss
resulting from inadequate or failed internal processes, the preference for
Audit as a main tool for managing Operation Risk is justified.
202

4.8 OBJECTIVES OF RISK MANAGEMENT
Kendalls coefficient of concordance is a measure of correlation/

association that is employed for three or more set of ranks. Kendalls
coefficient of correlation was computed to measure the level of consensus
among the respondents for the objectives of Risk Management. The
formulated hypothesis is
H022: No consistency exists in ranking the objectives of Risk

Management among the respondents.
TABLE 4.8.1 KENDALLS COEFFICIENT OF CONCORDANCE

(W)
Kendalls coefficient of concordance 0.058
Asmp. Sig 0.000
Kendalls coefficient of concordance and p value for scored

ranking were 0.058 and 0.000 respectively. Since p value is less than 0.05
(p-value < 0.05), null hypothesis is rejected and alternate hypothesis of
that there is consistency in ranking the objectives of Risk Management is
established.
Based on the mean ranking of the variables, the order of

importance is discussed in the table 4.8.2
203

TABLE 4.8.2 OBJECTIVES OF RISK MANAGEMENT
S.No. Objectives of Risk management Mean Rank Rank
1 Protecting and enhancing the reputation of 3.78 I

organisation.
2 Ensuring Regulatory compliance 4.92 IV
3 Ensuring efficient capital and resources 4.97 V

allocation
4 Loss avoidance 4.75 III
5 Increasing shareholder value 4.59 II
6 Reducing earnings volatility 5.43 VIII
7 Maximizing profitability of Business unit 5.07 VI
8 Safety of employees 5.26 VII
9 Clear reporting and disclosure to investors 6.22 IX
It is evident from table 4.8 that the main objective of Risk

management is to protect and enhance the reputation of the organization
with a mean score of 3.78. The next priority goes to increasing
shareholder value (4.59) and loss avoidance (4.75). The priority of
ensuring Regulatory compliance and efficient capital and resource
allocation is in fourth and fifth places respectively. The least objective of
Risk Management is clear reporting and disclosure to investors.
204

4.9 FACTOR ANALYSIS
Factor analysis is a statistical method used to describe variability

among observed variables in terms of a potentially lower number of
unobserved variables called factors. In other words, it is possible, for
example, that variations in three or four observed variables mainly reflect
the variations in a single unobserved variable, or in a reduced number of
unobserved variables. Factor analysis searches for such joint variations in
response to unobserved latent variables (Constructs). The observed
variables are modeled as linear combinations of the potential factors, plus
"error" terms. The information gained on the interdependencies between
observed variables can be used later to reduce the set of variables in a
dataset. In this chapter, exploratory factor analysis is used to identify and
define new factors extracted from a main construct of Risk management
practices.
Factor Analysis is employed to explore the underlying factors

associated with 20 items by using principal component analysis (PCA).
Generally, Kaiser-Meyer-Olkin Measure (KMO) is used to assess which
variables need to be dropped from the model due to multicollinearity. The
value of the KMO varies from 0 to 1 and KMO overall should be 0.60 or
higher to perform factor analysis. If not, then it is necessary to drop
variables with lowest anti image value until KMO overall rise above 0.60.
205

TABLE 4.9.1 KMO AND BARTLETT'S TEST
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. 0.799
Bartlett's Test of Sphericity Sig. 0.000
Null hypothesis: Correlation matrix is unit matrix (There is no

relationship between the variable). Since the significant value is lesser
than 0.05 null hypothesis is rejected. There is a significant correlation
among the variables.
The KMO result reveals a value of 0.799 which is higher than 0.60.
Therefore results for the Bartletts test of sphericity and the KMO
displayed in the table 4.9.1 reveals that both are highly significant and it
is concluded that these variables are suitable for the factor analysis
To determine the number of factors, the criteria that an Eigen value

should be more than one is followed. By looking at Eigen values, it is
seen that five factors have Eigen values over 1, so our results has 5
factors. Hence only the loadings of these five factors are considered for
further discussions. The analysis yielded five factors explaining a total of
54.29% variance for the entire set of variables
206

TABLE 4.9.2 ROTATED COMPONENT MATRIX
Communalities Eigen % of Cumulative

Factors loadings
FACTORS Indicator variables Values variance %
1 2 3 4 5
Prioritization of Risk 0.591 0.695
Regular feedback to senior management 0.498 0.659
Line management ownership of Risk 0.492 5.304 14.491 14.491
0.622
management
1
Process of Risk analysis 0.632 0.594
Continuous review/feedback on Risk 0.394
0.493
management strategic and performance
Identification of Risk 0.443 0.480
Risk appetite, Risk Tolerance, and Risk 0.569
0.705
treatment measures
Linkage between the Risk management 0.583
and individual performance appraisal are 0.644 1.933 11.969 26.461
communicated
Establishment criteria for evaluation of 0.445
2 0.581
Risks
Development of key performance 0.495
indicators to measure success of 0.572
strategies and emerging issues
Development and implementation of 0.430
0.448
Risk strategies
Continued in the next page
207

Communalities Factors loadings Eigen % of Cumulative
FACTORS Indicator variables
1 2 3 4 5 Values variance %
Level of understanding of Risk and Risk 0.720
0.819
management across the organization 1.410 9.695 36.155
3
Linkage between the Risk, aim and 0.710
0.801
objectives
Re-sourcing Risk management process 0.644
0.753
and strategies 1.197 9.421 45.576
4 Appropriate use of Risk recording 0.533 0.650
Monitoring strategies against key 0.577
0.580
performance indicators
Recording Risk 0.655 0.716
Defined communication policies, 0.517 8.713 54.290
0.563 1.014
procedure, systems and internal controls
5
Effective Organizational culture 0.420 0.450
Specification of the organizations Risk 0.390
0.447
environment
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization
208

From the table 4.9.2, it is observed that five factors have Eigen
values above 1. The important variables related to their factors are sorted
according to their loading weights. The influence of each factor with
factor loading is also explained in the table 4.9.2.
Factor 1 is labeled as Regularity of work due to high loadings. It

includes Prioritization of Risk, Regular feedback to senior management,
Line management ownership of Risk management, Process of Risk
analysis, Continuous review/ feedback on Risk management strategies
and performance and Identification of Risk. The first factor explained
14.49% of the total variance.
The next contributing factors are labeled as Measuring and

Developing Risk strategies, due to the next high loadings. The factors
under this label are Risk appetite, Risk tolerance and Risk treatment
measures, Linkage between the Risk management and individual
performance appraisal are communicated, Establishment criteria for
evaluation of Risks, Development of key performance indicators to
measure success of strategies and emerging issues, Development and
implementation of Risk strategies. The second factor explains 11.969% of
the total variance.
Factor 3 is labeled as Understanding and Linkage with

Objectives that includes Level of understanding Risk and Risk
management across the organization and Linkage between the Risk, aim
and objectives. This factor explains only 9.695% of the variance.
The next contributing factor is named as Risk Evaluation and

Monitoring. The contributing indicators to this factor are Re-sourcing
Risk management process and strategies, appropriate use of Risk
209

recording and Monitoring strategies against key performance indicators.
The variance contribution of this factor is 9.421%.
Factor 5 is named as System, process and culture as it includes

Recording of Risk, Defined communication policies, procedure, systems
and internal controls, Effective Organizational culture, Specifications of
the Organisations Risk environment. The fifth factor explains 8.713% of
the total variance.
210

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CHAPTER IV

ANALYSIS AND INTERPRETATION

Risk Management is not a one off activity. Risk Management is a

The influence of respondents paid up capital, sales, years of

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Nearly 46% of the respondents have sales of 0-100 crores.

It is evident from the table that majority of the respondents year of

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2 Yes 165 93.8

3 Total 176 100.0

Risk Policy clearly explains the objectives of Risk management

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S.No. Risk Management and its Strongly Strongly

Risk Management No of respondents 0 0 44 90 42 176

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Does Organisation has

2 Yes 170 96.6

3 Total 176 100.0

From the table 4.1.4, it could be inferred that majority of the

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Figures in parentheses denote percentages.

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People Nature of Industry Total

Figures in parentheses denote percentages.

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Risk Nature of Industry

Figures in parentheses denote percentages.

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3 Meetings, conferences, briefings

The table 4.1.8 reveals the Risk Policy promulgation throughout

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S.No. Risk Register /

2 Yes 124 70.5

3 Total 176 100.0

In order to manage the risks effectively, the organisations need to

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Contents of Risk Register No of

3 Existing controls 67 54.03

4 Consequence and likelihood 76 61.29

5 Initial Risk rating 39 31.45

6 Vulnerability to external/internal 25 20.16

Further to the question of whether the organizations have Risk

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Key Indicators To Assess No of

2 Yes 154 87.5

3 Total 176 100.0

KRI as a measurable metric provides insight into the companys

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Frequency of Reviewing and No of

4 Total 176 100.0

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Managing Risk Using No of

2 Yes 119 67.6

3 Total 176 100.0

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To find out the variations of all the Likelihood Occurrences of

TABLE NO 4.2.1 ONE SAMPLE STATISTICS OF LIKELIHOOD

S.No. Likelihood Occurrence Weighted Std. Coefficient