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A latest report from consulting firm EY has said that Indian companies are rather slow in adopting whistle-blowing policies.
The survey: 'The whistle-blowing quandary: India Inc.'s journey from oblivious to obvious' reveals that while a majority of respondents assented to having a whistle-blowing mechanism, only 13% were fully compliant with the Companies' Act 2013.
It also stated that only 22% of the respondents had implemented the framework because they considered the structured mechanism integral to their business operations. While many organizations had a policy in place, half of the respondents offered only one channel for reporting of complaints - which is more a 'tick in the box' approach than actually reaping the real benefits of a whistle-blowing framework, EY said in its report.
Arpinder Singh, Partner and National Leader, Fraud Investigation & Dispute Services, EY said, "India Inc. still needs to make significant headway to benefit from an effective whistle-blowing framework. Today, regulatory measures are paving the path for sound governance practices; there are a series of metrics which need to intelligently converge for the mechanism's success.
The vigil mechanism may only be an element in the larger risk mitigation framework; however, our understanding of market dynamics has helped us gauge its significance, if implemented correctly. Going forward, it is necessary for the management to pay more attention to the intricacies of the framework through efficient monitoring, support and oversight and most importantly, establishing a robust fraud response plan."
The EY report further added that certain sectors such as automotive and telecom are able to derive greater benefits from implementing a whistle-blowing mechanism as compared to others.
"This appears because the organizations surveyed were led by global mandates and the nature of investments seemed to incorporate leading practices. Our survey stated that although only 50% of the companies in the automotive sector had a policy and mechanism in place, they had more evolved systems. Most of the salient features such as multiple reporting channels, fraud response plan, guidance on reporting, anonymity and safeguards against victimisation were prevalent. In the telecom sector, around 83% had a policy and mechanism, with a better success rate with complaints received," EY added.
EY official further also noted that the success of a whistle-blowing framework is defined by a number of factors - scope of the content, awareness across ranks, reporting channels, subsequent handling of the complaint etc.
"However, the true test lies in the nature of complaints which arise and are flagged. 56% of the survey respondents indicated that less than 25% of the complaints reported the need for further investigations.
This indicates that majority of the complaints received were not within the scope of whistle-blowing. Lack of clarity on the purview and inadequate training can be major deterrents in establishing an effective mechanism," the report noted.
