Startup Founders Should Constantly Track Risks For Long-Term Sustainability: RBI Governor

Reserve Bank of India Governor Shaktikanta Das on Thursday (June 9) said that entrepreneurs should keep an eye out for risks for long-term sustainability of their businesses.

“They (founders) should constantly evaluate the build-up of risks and vulnerabilities in their businesses. I recognise that many of them may already be doing it and risk taking is a part of their business model, but nonetheless these are things which should always be kept at the back of one’s mind for long-term sustainability of any business”, Das said during his address at an event organised by the Central Board of Indirect Taxes and Customs in Mumbai. 

Das also said that businesses are undergoing a redefining phase and are adapting to new realities. 

“Adoption of digital technologies and artificial intelligence (AI) is getting accelerated across sectors. These disruptive technologies offer opportunities to young enterprises to create their own niche in markets dominated by incumbents,” he said. 

Speaking about the Indian startup ecosystem, the governor said that young entrepreneurs are tinkering with experiments in newer domains such as digital payments, online retail, education, among others.

Das also said that the number of unicorns in the country is rising very fast, and added that these startups are being aided by venture funding, accelerators and new patterns of consumption in the society. 

The RBI Governor also called on companies to strengthen corporate governance structures to build an environment of trust, transparency and accountability. 

He said that entities should build sound business models and avoid inappropriate funding structures, and also cautioned founders against building asset liability mismatches, unrealistic strategic assumptions and neglecting compliance systems.

The Governor’s comments come at a time when there are whispers of a funding winter in the startup ecosystem amid the Russia-Ukraine war and rising inflation.

Accelerator Y Combinator recently told its startups across the world that ‘the safe move is to plan for the worst’. Sequoia, in an internal presentation, also advised that ‘it is a time to pause and reassess’.

As per Inc42, Indian startups have so far laid off 9,268 employees in 2022.  Funding for Indian startups fell by 53% on a month-on-month basis in May 2022 to $1.6 Bn, from $3.4 Bn in April this year. 

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