Robust risk management strategy must be in place in organisations to enable them to compete in the global market, said Ashok Soota, past President, Confederation of Indian Industry (CII) and Chairman and Managing Director MindTree Consulting [Get Quote].

Highlighting the challenges faced by the India Inc in Bangalore on Friday, he said it is essential for organisations to have risk management as a dedicated function with quantified metrics and robust monitoring mechanisms.

"In today's world, there is a high probability of 'low probability events' taking place. An interconnected world exposes us to risk we cannot foresee such as 9/11 disaster," he said.

The second challenge lies in responding to changes in market environment. Some changes are evolutionary, like the costs of Indian IT workforce going up every year and some are dramatic, like the appreciation of Indian rupee against the US dollar in first three months of 2007, he noted.

"If we can anticipate such changes and plan for it, we are much better prepared for the future. For example, Indian IT/BPO industry is now expanding into "near-shore locations" in Latin American and Eastern Europe, Indian Pharmaceutical industry is graduating from producing generics to researching new molecules and selling branded drugs," Soota said.

However, not everything can be anticipated and we need to evolve new capabilities to respond to changes, Soota said.

The third major challenge that globalisation brings is legal and regulatory differences. While WTO and free trade agreements have helped a lot, one gets to see the real impact of these differences only when one starts operating in new countries.

"Just as we often hear foreign investors complain about the complexity of Indian regulatory environment; Indian companies find it equally challenging to operate in foreign regulatory environments," Soota said.

The fourth challenge, which is difficult to quantify and control, is about leadership and cultural diversity. Only a handful of Indian businesses have the experience of managing a global workforce, he said.

"We need to have an open mind about accepting people's working style and individual tastes and performances", he added. "Cultural diversity if utilised well, enhances one's ability to generate new ideas", he said.

Further, Indian companies have a growth mindset as against a cost-cutting one, which is particularly helpful in case of cross-border acquisition.

Pankaj Chandra, Director Indian Institute of Management Bangalore (IIMB) said there were five key challenges before India Inc, which included integration of domestic operations of large companies with foreign operations without cost disadvantage and integration of different kinds of skills.

Kuldeep Jain, Associate Principal & Head Corporate Finance Practice McKinsey, India, said globalisation was important to increase the share value of the company. According to a McKinsey survey, 62 per cent of local companies have more global value than 57 per cent emerging global leaders.

Globalisation is essential to leverage comparative advantage, pursue growth opportunities and boost capability to compete even in home markets, Jain said. Referring to mergers and acquisitions, he said cross-border deals are increasing.