W ith incidents of fraud, espionage and corruption on the rise, corporate India needs a proactive approach to fraud risk management. Organizations are now compelled to rethink their business strategies and evaluate stringent measures to de-risk themselves by institutionalising a holistic framework that fosters transparency, promotes an ethical culture and sustains profitability in the long run. In light of this, it would be interesting to track a few key trends companies operating in India can watch out for in 2014 to mitigate fraud risks of the new age workplace.

Checks and balancesLaw abiding corporates on the rise: The Companies Act 2013 will be a game changer for India Inc. as it is a step towards increased accountability and enhanced corporate governance standards. It confers greater responsibility on independent directors and auditors by outlining a key set of reporting requirements they should follow if a fraud occurs. So, 2014 will see Indian corporates conducting operations in a more ethical manner, with a heightened focus towards compliance. This will also encourage adoption of anti-fraud and anti-corruption practices internally.

Vendor due diligence to drive transparency: A majority of prosecutions related to corruption and bribery worldwide have involved third parties such as vendors, suppliers and distributors. Regulatory bodies may also hold companies responsible for the actions of third parties which represent them or have a business relationship with them. In 2014, companies will need to undertake a thorough due diligence procedure before forging any relationship with third parties. This could be on their background, track record and reputation and check on the possibility of any undisclosed relationships.

Tech talkRiding the technology wave: In this digital era, organisations are leveraging technology to access, connect and share information electronically — all with just the simple click of a button. As a result, fraudsters too have become extremely tech savvy. Cyber crimes are as common as traditional financial frauds and these pose as key threats. In 2014, forensic data analytics will play a critical role to mitigate fraud in organisations.

Building risk models and patterns with strong algorithms to connect the missing dots will help companies reduce surprise attacks from these frauds. Advanced forensic data analytics techniques and strong text mining capabilities, with the support of Big Data analysis will be a significant factor in protecting and alleviating the risks faced by organisations.

Leveraging HR to win the fraud battle: Human resources (HR) professional’s role has transformed significantly and has gone beyond just ‘dealing’ with employee issues.

In 2014, HR will need to manage a broader mandate and will be entrusted with laying the foundation of an ethical culture. HR will also play an instrumental role in promoting the organisation’s code of conduct and building compliance with requisite laws.

Corporate dynamics will also drive HR to ‘consult’ the senior leadership team, especially on good governance (right policies, training strategy and awareness). Simultaneously, they will also need to ensure that there is no violation of an individual’s rights and maintain a ‘human’ perspective. HR’s role around fraud risk becomes valuable because they deal with human behaviour, which is not discernible.

An HR professional’s background and ability to understand the complexities of human behaviour gives them an edge to demystify the psyche of a fraudster.

Watching outCrusading for greater vigilance: The corporate sphere has become increasingly interlinked and networked. While the senior management is more tuned into the pulse of the organisation, the concept of vigilance needs to go beyond the boardroom and trickle down to the employee level.

According to EY’s India fraud Survey 2012, out of the 58 per cent companies that witnessed fraudulent activities last year, 62 per cent indicated that whistle-blowing tips helped in their detection.

In 2014, organisations will realise the importance of institutionalising a robust whistleblowing framework to create and maintain a high level of awareness and transparency.

(The author is Partner and National Leader-Fraud Investigation and Dispute Services, EY India)

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