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Is India Inc well prepared to avoid future 'Satyams'? 
(Thu, 18 Dec Pre-Open) 
 
It's been almost six years since India witnessed one of the biggest corporate frauds ever. Committed by none other than the top management, revealed only through confession, the fraud at Satyam

led to massive erosion in the shareholders' wealth overnight.

Such an event should have led to enough overhauls in the corporate laws and vigilance to ensure such cases are not repeated. However, nothing of that sort happened. In the following years, the list of corporate scams just got longer with names like NSEL, Sahara, Saradha and so on added to it.

Forget the preventive measures. Our system has been too lax in its reaction. As we all know, the market regulator took more than 5 years to close the Satyam case itself. It is obvious that India Inc. or the authorities have not taken enough steps to deal with the menace of corporate fraud. And a recent survey of 400 odd executives by Deloitte India confirms the same.

56% of the survey respondents do not believe that the new company law can control the fraud and expect such cases to go up. India Inc. is yet to wake up to the need to create awareness on fraud prevention. This is evident as just 38% of the survey respondents indicated that they organized periodic training programmes for senior management. In fact, most of the survey respondents were ignorant about technology led new frauds.

Cases regarding corruption and bribery, non compliance to regulations and theft or bribery continue despite IT controls, whistle blowing policies and internal audit reviews.

So what are we missing here?

One of the reasons is that the reactions to such events - internal investigations, disciplinary actions and preventive mechanisms - still remain conservative. Even if we ensure 100% action here, these are reactive responses. What we need is a proactive approach. This will involve regular monitoring of such risks, due diligence checks and use of forensic data analytics. Further, higher accountability from the top management that also happens to be the main culprit in a lot of such cases will go a long way in checking corporate fraud.

It is high time that the feedback from the survey is put to good use. Afterall, fraud in a company is not just limited to that particular entity. It can have far reaching implications in this highly interconnected world. One of the repercussions is that such events tarnish corporate India's reputation globally. India Inc. must ensure preventive, detective and damage control measures at all levels. While this may involve some cost in initial stages, it will be small considering the huge damage that a fraud once committed can incur.

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