India Inc scores low on fixing individual accountability

Around 80% of India respondents in the survey 2016 believe prosecuting individuals would help deter future fraud, bribery and corruption by executives

Corporate India is behind global peers when it comes to fixing individual accountability for fraud, bribery and corruption. A higher degree of loyalty to company or colleagues is seen preventing whistle-blowers in India, according to EY Global Fraud Survey 2016.

Around 80 per cent of India respondents in the survey 2016 believe prosecuting individuals would help deter future fraud, bribery and corruption by executives.

Perhaps reflecting India Inc's battle against corruption is going to be a long-drawn one, 30 per cent of respondents are prepared to book revenues earlier than they should be recognised, the highest proportion globally (four per cent), as against nine per cent in emerging markets. About 28 per cent said bribery is still used to win business contracts, as against 11 per cent globally and four per cent in developed markets.  

Part of a global survey that involved 2,825 individuals-including 50-odd India-based chief financial officers (CFOs), legal heads and compliance heads-India ranks 17th in the top 29 markets that consider bribery and corruption as on-going challenges. About 58 per cent of respondents said they believed bribery and corruption was widespread in the country, as against 39 per cent globally.  

Almost a third of respondents (30 per cent) in India cited loyalty to their company or to colleagues (28 per cent) as a reason to not report any incidents of fraud, bribery or corruption. This is in stark contrast to the global average at 19 per cent of respondents citing loyalty to company and 18 per cent to colleagues.

About 70 per cent justified adopting unethical means to meet financial targets. These include adopting more flexible product returns policies, changing assumptions determining valuations or reserves, extending monthly reporting period, backdating a contract or even booking revenues earlier than they should be.

"India needs to fix individual accountability to make its fights against corruption and fraud more effective," said Mukul Shrivastava, partner, fraud investigation & dispute services, EY India.

The survey noted that amidst a changing regulatory regime, there has been a notable increase in enforcement by Indian authorities. The government and financial regulators are taking measures to combat black money through amendments in the Benami Transaction (Prohibition) Bill, and legislations focussing on corruption and whistle-blower protection, the survey added.

"Although 76 per cent of companies have anti-bribery and anti-corruption policies in place, they must realise that 'paper-based compliance' will not suffice," the survey said.  From an operational perspective, companies find it a challenge to define key performance indicators for their compliance functions and demonstrate the value they deliver to the business, the survey said.

Striking a warning note, the survey noted that many Indian firms still don't recognise cyber crime as a risk.