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Impact of recent regulatory changes on Ethics & Integrity in Commercial Organisations.

What does it mean for future?


The rapidly changing regulatory landscape in India and the dynamics of social media has placed greater onus on commercial organisations to have robust internal mechanisms to deal with integrity and corruption related issues. With increased liability and reputational risk for investors and stakeholders, many responsible and progressive organisations are becoming more aware and ramping up their ethics and integrity framework. The focus is shifting from treating complaint-handling as just a grievance redressal and management support function to building smart and intelligent organisations that take informed decisions based on innovative tools of business intelligence and a robust internal investigations mechanism to mitigate risk and losses. Early detection and better management of fraud risks goes a long way in building and propagating an ethical business culture.


In the last few years, structural reforms like GST implementation, demonetisation, insolvency laws, auctioning of public resources, digitisation, expansion of the tax base have created short-term pains in terms of business disruptions and high compliance cost. The Foreign Direct Investment Policy, 2017 (FDI Policy) in India is an investor friendly policy, under which FDI up to 100% is permitted on the automatic route in most of the sectors/ activities. Old FEMA 20 and FEMA 24 have now been subsumed into the New FEMA 20. Initiatives driven by the Centre namely the ‘Make in India’ and ‘Digital India’ playing a pivotal role in India’s economic growth.


In recent years, India has passed at least five legislations specifically supporting efforts towards preventing corporate fraud, malpractice, and misconduct. Regulators are aware of the challenges faced by organizations in curbing fraud and are determined to ensure business is conducted ethically. The Prevention of Corruption (Amendment) Act, 2018 is now more comprehensive and targets bribe givers too, with the objective of placing accountability on commercial organizations to ensure that they work towards putting in place adequate procedures designed to prevent bribery. Section 9 of the Amended Act now specifically deals with commercial organizations to include all forms of business structures, employees and vendors. This principal approach is certainly in line with global standards of anti-bribery and anti-corruption measures.



The Fugitive Economic Offenders Bill, 2018 is expected to deter individuals involved in fraud and other economic offences from fleeing stressed the country to escape criminal prosecution. The Insolvency and Bankruptcy Code is improving insolvency resolutions in India by conducting proceedings in a time bound manner alongside providing economically viable alternatives to resume stressed business. The Securities Exchange Board of India (SEBI) has mandated that every listed company should have a whistle-blower policy and make employees aware of such policy as also reward the informants for coming forward. Recently, the Companies (Auditor’s Report) Order, 2020 (CARO 2020) was issued by the Ministry of Corporate Affairs, for strengthening the corporate governance framework under the Companies Act, 2013. The Order applies to every company, including a foreign company as defined in the Companies Act, 2013.


As per Global Fraud Report 2019-20, fraud risk remains high in India and whistleblowing is on the rise. Respondents in India prioritize the prevention of counterfeiting (76 percent vs. 58 percent globally), money laundering (78 percent vs. 62 percent globally) and are acutely concerned about adversarial social media (81 percent vs. 63 percent globally), an apprehension that grew during the heated national election campaign of May 2019 in which social media played a sizable part. Significant data theft has affected 41 percent of Indian companies in the past year (vs. 29 percent globally). A much larger percentage of respondents in India than anywhere else worry about market manipulation through fake news (76 percent vs. 59 percent globally).


Whistleblowing reports are on the rise in India, perhaps helped by the role of whistleblowers in bringing to light recent well-publicized corporate fraud events and by the expectation of stronger legislative protections. In wake of the global MeToo movement and social media, there is heightened awareness amongst the women workforce to report any sexual misconduct against them. Such increase in reported cases should be matched by the preparedness of the organisation in terms of awareness to deal with complaints, streamlined process of inquiry and redressal, compliance with legal norms and mandated timelines. More important is to take proactive steps through training and sensitisation of the workforce, while also building in-house capacity to remain updated with latest judicial interpretations.


Creating ‘smart and intelligent organisations’ is the need of the hour. Businesses should incorporate business intelligence tools, techniques and investigation methodologies to make in-house vigilance more robust and reliable. This is where expert consulting can come to the rescue of those organisations which are either new or have not opened fully to the dynamics of modern integrity management or want to ramp up their existing capabilities. This requires the independent experts to assess and survey the nature and scale of operations, understanding workflows and meeting with relevant employees, assessing the process gaps and leaks, study the trends and patterns to devise a resilient framework of organisational intelligence. This is an extended concept of business intelligence weaved into the organisational working, thus making them a ‘smart’ organisation. Businesses need to invest additionally towards putting in place processes and ensure compliance with the changing regulatory landscape. An organisation should not only be ethical, but it should also be seen and perceived to be ethical. For this to happen, all stakeholders must come together and embrace the concept of ‘ethics and integrity management’ as central to the growth and vision of the company.



-The writer is co-founder and Managing Director at InteLaw Consulting Private Limited, India’s only consulting company founded and managed by eminent former intelligence and law enforcement experts of the Government of India, including CBI, Police and Central Intelligence, leading industry and subject matter experts from top-tier tier consulting firms. InteLaw has pioneered the concept of ‘Investigations Consulting’ and ‘Integrity Management’ to create more ethical, smart and intelligent organisations and to help businesses navigate through various risks and challenges. Learn more about how InteLaw can help your business grow ethically and securely, at www.intelawconsulting.com or connect with the author at ravi@intelaw.org.




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