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BW Businessworld

Corporate Fraud & Reputation Risk

Taking the onus to spread the importance of mitigating corporate fraud in your corporate ecosystem is a great initiative you can take to function as a responsible organization

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Corporate fraud, although a global phenomenon, is more pronounced in some emerging countries. While corporate fraud technically means intentionally misleading a company via misrepresentation of financial facts or statements, it goes way beyond just the adversarial financial impact it has on the company in the long-term.

The Wall Street Journal claims that a staggering 80% of Indian respondents it interviewed reported they experienced some kind of fraud - be it bribery, money laundering, regulatory breaches, theft of intellectual property, or other forms of malfeasance.

Corporate fraud may stem from poor corporate governance, shallow accounting standards or limited financial regulation. People working in an ivory tower or silo, where there is less supervision or collaboration, alongside a weak value system may trigger corporate fraud in its worst form.

Theft of data, bribes from vendors and other malfeasance can impact the company's reputation. The repercussions are many and uninspiring. More global corporations need to take this matter seriously before they lose their market reputation and overall brand image which, in some cases, generations may have tenaciously built.

What's worse is employees working in these companies face an unemployment slump that impedes their career growth and aspirations. Overall their business ecosystem enters a downward spiral, loses its luster and destabilizes investment as well.

That said, corporate fraud boils down to one key thing: morality.  Companies, irrespective of commercial successful, cannot survive, if they don't abide by a basic code of ethics and values.

However, the sanguine part of detecting fraud at a corporate level opens up many avenues for companies to forge and build a high integrity community, and develop principles of a value-based cultural DNA that will never relinquish their personal and professional brand equity.

Instances of compliance and regulation breaches, in some cases significant fines and penalties, underpin why companies should dwell upon their corporate consciousness, and move ahead to build something of purpose.

Some actions one can incorporate to avoid corporate fraud:
"    Build thought leadership that best defines how you as a company are making efforts to create a value-driven organization, with a focus on ethical growth.
"    Start functioning across silos and build employee advocacy, talking about the impact of corporate fraud on businesses in the long-term.
"    Embed strong corporate governance in the way your company responds to the market - with a focus on being both fast and right - as that will help to not only to combat fraud, but also thrive.
"    Focus on hiring the right people with the apt capabilities mix - potency, values and knowledge.

What is warranted in the scenario of a dire effect of corporate fraud, is to closely mitigate, monitor and address such issues (including protecting whistle-blowers), and make it part of the management process with immediate priority.  

An Internal Audit or Ethics Committee should be appointed and on standby in every Large entity and SME in India, to trace and address any kind of corporate fraud - and start eliminating it from the grass-roots.  By appointing a dedicated committee, your company would have the agility to keep pace with global standards of ethics, value systems and anti-fraud guidelines.

Taking the onus to spread the importance of mitigating corporate fraud in your corporate ecosystem is a great initiative you can take to function as a responsible organization.

In conclusion, aim for excellence in values, honesty and a high level of dignity that best describes your company's reputation, but also remove any kind of inconsistencies in systems or personnel that don't align.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Tags assigned to this article:
corporate fraud

Deepak Bhawnani

The author is Founder & CEO at Alea Consulting

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