Study Shows That Corporate Fraud Is Rising in India
Corporate Fraud on the Rise in India
According to a new study by Assocham and Grant Thornton, corporate fraud has risen by over 45% in India in the past two years—and as a result, international organizations are becoming wary of investing in India.
The experimenters elaborated that, from what they observed, corporate fraud arose from multiple sources, such as corruption, money laundering, evasion of taxes, fraud in financial reports, internal bribery, lack of resources, and overriding higher management.
As part of their study, they also looked into which types of companies were more or less susceptible to fraud. Their results found that the most vulnerable companies were in the real estate and infrastructure sector (52% of the total), followed closely by financial services (which made up 34%). Less at risk were the following sectors: telecom companies (5%), manufacturers (3%), electronics/IT (2%), and the hospitality/tourism industry (2%).
What the experimenters found from their survey respondents proved somewhat discouraging for Indian corporations going forward. 65% of the respondents said that they believed there was a rising trend of willful defaults and frauds, with 71% believing that incidents of fraud would continue to rise in the next five years. When asked what the top types of fraud they’d experienced in the past two years was, the most popular were bribery, corruption, and regulatory noncompliance.
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D.S. Rawat, Secretary General of Assocham, one of the companies in charge of the survey, summed up their findings as so: “Corporate wrongdoing inevitably ends up creating a vicious cycle that hurts shareholders value, damages investor’s trust, leads to locking-up of capital in litigation, and ultimately causes wider financial market instability; eventually becoming part of much larger problems.”
But not only does corporate wrongdoing negatively influence external sources, such as shareholders, investors, and foreign corporations—it also hurts the employees within the company, and it can hurt their families too.
According to the study, 69% of respondents believed that strong internal controls were the most effective mitigation strategy for dealing with operational and financial risks to do with fraud.
One way you can make sure your company is stable and protected? Implement a strong compliance program, and have an ethics reporting tool in place for your employees to blow the whistle at the first sight of any wrongdoing in the workplace. When employees fight against corruption in their own company, it’s a win for the company, a win for the investors/shareholders, and last but not least, a win for the employees themselves.