In conversation with Mr Maharudra Wagle, Group CFO and Head - Group Resources, IL&FS

He speaks strongly about good governance and always keeping in mind the brand value of the organisation, by talking to the world as one voice and not as individuals.

Why has Corporate Governance become relevant under the current regulatory regime?

The Corporate World has become more aware of its responsibility towards creating a secure environment and need for transparency. The laws have been defined from a corporate industry perspective, the requirement of established regulatory authorities or governing bodies like SEBI, RBI and IRDA as well as upcoming authorities, is extremely essential

Considering the collapse of Mega Corporations in 2008 in the US or on our home turf in 2009 due to financial irregularities, authorities have strengthened the regulatory space. Regulations and good governance go hand in hand, and ensure that corporate practices are meaningful and well followed. For a progressing nation like ours, all these are very important

Do you think that the role of a CFO has evolved over the years?

The duties of a CFO have evolved, gradually. In the past few years, a CFO's impact on the corporate world has been astounding. He / She is the controller of accounts, bearer of business insight, steward of governance and partner to the CEO in strategic decisions as much as in funding decisions

The role of a CFO is not restricted to raising and managing funds, but involves over-looking complex matters related to labour laws, taxation, Companies Act, et al; ensuring that the long-term financial picture of the company is well projected and protected. As per Companies Act, 2013, the CFO, along with CEOs and Executive Directors, is required to sign-off all transactions, suggesting that a company has met with all necessary regulations and laws to be followed. In addition to taking care of the firm's financial health, a CFO is increasingly looking at setting up operational and commercial strategies and navigating the organisation through tight credit markets and complex regulations. This makes a CFO's role very important

What should be the role of a Governance Committee, mainly from the standpoint of infrastructure and financial services business?

Governance Committee establishes ethical practices and ensures that the business runs on regulatory compliance and business friendly practices. Both infrastructure and financial services businesses, are highly regulated and ethically driven. The Governance Committee should ensure that full disclosure be made to stakeholders. It should also ensure that proper policies and procedures are adopted and monitored, and the same is being complied with. The Committee needs to review the adequacy of risk management and operational framework of existing as well as new businesses and financial products

As per the accounting parlance 'Substance Over Form', it is not merely about doing business, but also taking into consideration whether it is ethical, compliant with the laws, or is an act or practice being violated. This is where the governing council plays a vital role in ensuring that the policies are periodically reviewed and adhered to, and measure the quality of performance of the company

What in your view are the best practices for broad governance?

While there is no fixed set of corporate governance best practices, certain practices can be enumerated as follows

  1. Putting in place ethical ways of doing business,
  2. Balancing the objective of achieving business goals by aligning them to the organisation's requirement,
  3. Effectively ensuring that business strategy incorporates stakeholder values,
  4. Structuring a good corporate governance suitable for the organisation, and
  5. Having a reporting system to provide transparency and accountability

Based on the above, it is important to have on-going meetings and proper review mechanisms. The governing bodies need to determine, map and focus on the compliance reports that are most worrisome for the company and in our case, for the financial and infrastructure sectors, and how the laws will impact the company

Compared to earlier times, do you feel good governance today depends on the DNA of the organisation, its ethics and values? What are your views?

The DNA of an organisation is composed of its practices of decision making, of ways in which activities are coordinated, performance is measured, and people are motivated to achieve organisational objectives, along with the overall organisational chart. The values and ethics of the organisation flow from this DNA, which also guides whether an organisation is able to adapt to the best practices of governance. The regulatory atmosphere now, as compared to before, is more effective. In such a scenario, it becomes important to modify the DNA to adapt good governance

While setting the broader strategies for the company, how do you integrate and take into consideration the management risks?

The recent economic crisis clearly demonstrated that many companies were inadequately prepared to deal with major risk. The way forward may be in understanding the company's risk culture and addressing various gaps within the company, then setting up a risk strategy, aligning the risk culture with this strategy, and creating adequate resources to manage the risks

How do you manage conflicts within the various business initiatives and groups?

In scenarios where a variety of people from different backgrounds and ideologies work together in teams to achieve a common organisational goal, conflicting views and ideas become an obvious consequence. The ideal way to manage conflict is to identify the problems raised by each group, address them adequately and find a path which is a win-win for the organisation

According to you, what is the best method for fund management and allocation of resources, to maximise returns?

Resource allocation is the process of assigning and managing assets in a systematic manner. The aim is to make effective use of limited resources and gain the best return on investment

Banks and Financial Institutions are selective in disbursing loans, especially for infrastructure projects, owing to stressed economic situation and government policies. Under these circumstances, the funds should be used judiciously. Ongoing projects should be completed on timely basis and cost overruns should be avoided. Before entering into new projects, it is to be ascertained that all the risk factors are addressed

How successful were you, in putting in place the complex internal financial control structure?

This was a very strenuous exercise and was being implemented for the first time as required by the Companies Act, 2013. For an organisation like IL&FS, all processes were in place; we just had to strengthen them further. Standard Operating Processes were put in place and improvements in processes were adapted. All this ended well, as the statutory auditors’ report was absolutely clean. So the hard work paid off

If for a day, you were made the policymaker, what one thing would you do or amend?

I will review the best of existing policies and enhance them further. The policies made will definitely be focussed on improving processes to make the working conditions more transparent for companies, which in turn will benefit the economy

If not CFO, then what would have been your aspiration?

I would have been doing something creative; probably be a journalist, where one gets to interact with different personalities and gets a chance to creatively articulate various thoughts and ideas

From risk management point of view, what is your advice to large corporates?

In every transaction that you do, look at all the risks. Have a team which is experienced to look at all aspects with a fine-tooth comb; let everyone present his / her point of view. In the end, make it a collective decision. There may be difference in views, but try to mend all those views together and work out a process where it’s a win-win situation. Follow regulations strictly, but at the same time, don’t simply place your finger on the book and say it cannot be done



Maharudra Wagle


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