Startup Founders Should Constantly Track Risks And Business Vulnerabilities, Says Shaktikanta Das

The RBI governor said businesses should avoid aggressive short-term reward-seeking culture

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Shaktikanta Das, RBI governor, said on Thursday that Indian startups should constantly evaluate the build-up of risks and vulnerabilities in order to make their business sustainable in the long-term, while speaking at an event organized by the central board of indirect taxes and customs. He made this statement at a time when several startups are struggling to raise funds, following a number of factors that has led to the laying off employees as they attempt to cut operational costs.

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"A word of unsolicited advice to young entrepreneurs and startups that they should constantly evaluate the build-up of risks and vulnerabilities in their businesses. I understand that many of them may already be assessing the risk and risk-taking is a part of their business model. Nonetheless, these are the things which should always be kept at the back of one's mind for long-term sustainability model," RBI governor said.

"Businesses should avoid aggressive short-term reward-seeking culture without regard for the build-up of excessive risk in the balance sheet," he added.

The governor said that the single most important aspect that defines the long-term success of a business is corporate governance. In his words, "Ethical conduct, accounting transparency and appropriate business models are various components of the broader governance framework. Organizational culture can exert substantial influence on both ethical conduct and transparency practices."

Stating the fact that businesses are going through a redefining phase and adapting to the new realities emerging from the pandemic, Das said, "The adoption of digital technologies and artificial intelligence is getting accelerated across firms, businesses and sectors. These disruptive technologies offer opportunities to young enterprises to create their own niche in markets dominated by incumbents."

He also said that Indian business is now at a critical juncture with both opportunities and challenges. The macroeconomic and geopolitical environment is fast-changing and there is a greater need to remain alert.

According to reports, Indian startup ecosystem has emerged as the third largest ecosystem for startups globally with over 69,000 DPIIT-recognized startups, across 647 districts of the country, as of May 2022.