EY's recent worldwide Fraud Survey 2015 showed that much of corporate India felt strict adherence to anti-corruption measures can harm competitiveness in the current market conditions. Arpinder Singh, partner and national leader (fraud investigation & dispute services), EY, decodes some numbers and trends from the survey in a conversation with Ranjita Ganesan
According to your survey, about 66 per cent of Indian respondents were okay with some form of corruption - was the result surprising?
There has been a noticeable change in terms of regulatory dynamics recently. We have seen companies inducing transformation within the corporate sphere, with a focus on tackling unethical business practices. But this sentiment is short-lived and is yet to percolate through to the grassroots. Corrupt practices have for long been perceived as acceptable ways of doing business in the country, and a mindset change will take time.
Is it really getting easier for businesses to grow using fraud and corruption?
It is quite the opposite. The increase in sanctions levied by global developmental agencies showcases their non-tolerance toward unethical and corrupt business practices. With regulatory enforcement transcending boundaries (such as Foreign Corrupt Practices Act, UK Border Act), organisations are now liable to face repercussions that are not limited to non-compliance. But it is also at a more rudimentary level of not demonstrating a willingness to comply.
A large number of respondents admit to giving gifts. What drives this trend?
The concept of gifting in India has traditionally been acceptable within the corporate or social sphere. Often, businesses have taken advantage of this as a tool to enable them to gain a competitive edge. Globally, this is not an acceptable practice and has prompted several laws targeting bribery and corruption. It is also necessary to note that there has been a notable drop in the giving of cash as a gift - 34 per cent in 2013 to 27 per cent in 2015.
How do Indian companies fare versus global counterparts in terms of ethics?
We have received a strong response from Indian respondents on this front with 34 per cent rating their company's ethical standards when doing business as "very good". Eighty-one per cent are confident that their business operations in different countries meet the same ethical standards. Globally, this was 52 per cent. Another positive aspect was that 61 per cent said that ethical standards have got better in their company in the last two years while globally it was 33 per cent.
But many Indian companies claim to have taken action against employees who breach anti-corruption policies. What does this show?
This corroborates the fact that 52 per cent of respondents feel senior management has become more involved in driving this agenda during the past two years. Seventy-four per cent of respondents feel that senior management in their company display high ethical standards in the way they conduct business.
You say that while there is enhanced awareness about ethical practices, their acceptance might take time. Why is this?
Boardrooms are echoing with the malaise of corruption and industry watchdogs are high on their guard. The introduction of provisions to tackle instances led by law and regulators (The Companies Act 2013, Reserve Bank of India circular on fraud frameworks) shows the push for greater transformation. The impact of these mandates is being felt by the board of directors and management in India, who have introduced robust measures to combat and prevent these occurrences. But as highlighted in our survey, the management is also under tremendous pressure to boost growth streams (81 per cent feel managers are under pressure to create new revenue opportunities, while 66 per cent feel managers are under pressure to expand into higher risk markets). This is creating a dichotomy as they are unable to use questionable avenues that may have proved an easier option. This creates a myopic view with 57 per cent respondents stating that increased regulation in their sector is increasing the challenges for growth of business. So, while change is slowly seeping in, until this segment of the organisation embraces it, it will be difficult for it to trickle further through the ranks.
What should be done at the company level to control corruption?
Companies will need to build an effective and robust anti-bribery and corruption mechanism. That includes establishing a strong vigil mechanism, proactively conducting risk assessments and communicating the organisation's commitment towards such regulations.
What can the government do to deal with this?
Enforcement is one of the key deterrents to any corrupt or unethical practice. It is important to ensure compliance beyond just a tick in the box, adequate prosecution of offenders and a zero-tolerance attitude toward corruption and bribery.
