Determinants and implications of business strategic risk in Indian banks
Aman Pushp, Shailesh Rastogi, Bhakti AgarwalPurpose
This research aims to understand the Business and Strategic Risk (BSR) in Indian banks and identify the key determinants affecting such risk.
Design/methodology/approach
The research draws on semi-structured in-depth interviews. Data analysis was conducted using thematic analysis, combining deductive categorization and inductive coding to identify the factors shaping BSR in Indian banks.
Findings
The findings reveal that technology shifts, competition from banks, FinTech platform, and Non-banking Financial Companies (NBFC), customer preference, industry margin squeeze, technical efficiency, reputation risk, and regulations are significant determinants of BSR. Notably, reputation risk has emerged as a novel determinant of BSR, emphasizing the importance of institutional credibility and stakeholder trust in shaping banks’ strategic outcomes. The interplay of these factors pushes banks to invest in state-of-the-art technology and improve customer engagement. These elements affect their strategic decision-making and operational frameworks, highlighting the need for enhanced risk management practices. Building on Resource based theory, the study suggests that external constraints on banks can be effectively managed through the development, integration, and deployment of internal organizational capabilities. These evolutions in the banking sector have intensified institutional risk which necessitates new regulatory and governance mechanism that can address and keep pace with evolving challenges.
Originality/value
The study integrates fragmented literature on technological development, competition, regulation, and BSR into a unified framework, offering a more comprehensive understanding of strategic risk in banking.