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Special feature: India


  • Ethical standards rising — but there is still much ground to cover

    India has witnessed a transformation in its anti-corruption regime, spurred by Government initiatives, regulations and changing public sentiment. The Companies Amendment Bill 2016, which focuses on governance and ease of doing business in India, and has been an important factor in enhancing ethical standards. According to 70% of the respondents in India, such Government efforts against bribery have had a substantial impact on corporate India. 

    This is also reflected in respondents’ views of their own organizations. India ranks the same as Mainland China with 60% of respondents stating that their company’s ethical standards have improved in the last two years. However, 78% also say that fraud, bribery and corrupt practices continue to happen widely in India, followed by 48% stating that it is common to use bribery to win contracts. These findings put India above the regional averages of 63% and 35% respectively. 

    In line with other countries, respondents in India said they had ABAC training and policies in place. However, organizations in India still have some gaps when it comes to tone at the top and could do more to demonstrate ethical leadership.

    More than half (57%) say that, even though senior management said “no” to bribes, they would choose to ignore unethical actions of employees to achieve corporate revenue targets. The sentiment was quite strong, with 23% saying “definitely yes”, more than double the regional average of 11%, to senior management choosing to ignore unethical actions of employees. Almost a quarter (24%) of respondents say their organization’s management would also justify ignoring compliance controls to meet revenue targets. With 86% of respondents saying they would consider employment opportunities elsewhere if their organization was involved in a major fraud, bribery or corruption case, companies in India need to do more to strengthen their ethical leadership.

  • Concerns around whistleblowing mechanisms

    Since the 2016 Companies Amendment Bill made setting up a whistleblowing mechanism mandatory for listed companies in India, whistleblowing hotlines have become more common. However, 47% of respondents feel under pressure to withhold information about misconduct and 44% of respondents in organizations where a hotline was in place say they would not use the system. Of these, more than half are concerned about insufficient legal protection and a third do not believe their report would be treated confidentially.

  • More discipline needed in third-party due diligence

    More than 80% of respondents say it is important to understand a third party’s ultimate owners, compliance culture and any news or litigation associating the organization with fraud, bribery or corruption. However, we still see gaps in conducting robust due diligence and monitoring.

    One of the challenges is that, frequently, a public domain search in India does not reveal adequate third-party information. Organizations need to conduct field surveys and background checks to get adequate certainty around information integrity before entering into a contract, which includes audit rights to enable continuous monitoring.

    Those with a complex network of third-party relationships should consider using web-based tools to standardize transparency and accountability. These tools enable life-cycle management of third parties, with automated risk-scoring engines to calculate risk according to individual organizational priorities.

“In 2017, the battle against fraud and corruption is expected to see a tectonic shift as India strives to keep pace with global standards, drive sound governance and stimulate business growth. As enforcement actions by local authorities grow stronger and employees resist being part of unethical work environments, the future of compliance programs will become more visible, resilient and technologically-led.”

Arpinder Singh, India and Bangladesh Leader, Fraud Investigation & Dispute Services

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