With an increasing number of corporates mobilising resources to support the government address the COVID-19 threat, there is a greater need for due diligenceby companies on the partners they choose to work with to implement the relief measures, consultancy firm EY said on Wednesday.
Engagement with an unknown third party can expose corporates to both financial and reputational risks, EY warned in a report following a survey on Corporate Social Responsibility (CSR) trends.
"In the current pandemic stage, wherein corporates are mobilising resources to support the Government address the immediate threat, the need of diligence cannot be overemphasised," the report said.
"Organisations may be keen to get involved in ongoing pandemic relief schemes and collaborate with (unknown) third parties to deliver innovative solutions with maximum reach. But the engagement may potentially expose them to both financial and reputational risks," it added.
The survey of an unspecified number of CSR executives said nearly half of the respondents had not taken any steps to check the partners' past record, and the report also acknowledged that identifying the right partner is extremely time consuming, tedious and complex.
It said 65 per cent of the surveyed respondents said they do not have a defined third party diligence policy that covered execution partners.
The report also highlighted a slew of other concerns about CSR. About 13 per cent of the respondents in the survey reported unethical behaviour in CSR projects and 15 per cent said they have no knowledge about the nature of the CSR expenditure incurred and if it was real or fictitious.
A third of the respondents said financial misrepresentation of CSR funds is the most critical unethical practice demonstrated by implementation partners, which may include personal/family/friends travel expenses, among others.
It can be noted that many corporations have undertaken a slew of relief efforts post the pandemic which are being done either through themselves or by appointing NGOs as implementation partners.
Many corporates have also committed money to the specially created PM-Cares Fund, which helps the money count as CSR allocation.
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