The Hindu Business Line : ‘Tone at the top’, a key element to combat fraud risk: E&Y survey

New Delhi, April 25 Managing fraud risk is a business imperative in today’s environment of growing instances of corporate fraud. “Tone at the top” is one of the key elements to combat fraud risk, according to Ernst & Young’s ‘Fraud Mitigation Survey 2008’.

“Tone at the top” refers to the ethical atmosphere created in the workplace by the organisation’s leadership team. It is suggestive of the tone set by the management by prioritising corporate values above other factors.

The fraud mitigation survey, which includes views of 124 management personnel across multiple industries, provides insights into the management’s perception of ethical issues in today’s dynamic corporate scenario. It also discusses fraud mitigation measures taken by organisations and their effectiveness in strengthening the “tone at the top”.

Forty per cent of respondents revealed that there had been a suspected incident of fraud, misconduct, bribery or corruption in their companies. Among the key functions in an organisation, Purchase (19 per cent respondents) was found to be most vulnerable to fraud risk, followed by Sales, Accounting and Warehouse/Inventory.

Ms Navita Srikant, Partner and National Leader, Fraud Investigation & Dispute Services, Ernst & Young said “Against the backdrop of a dynamic business environment, fraud is emerging as a key business risk. In order to reduce fraud incidences, consistent proactive efforts need to be made to identify fraud vulnerability in business processes and establish effective mechanisms for fraud control monitoring. Findings of the Ernst & Young fraud mitigation survey are representative of the management’s view on fraud mitigation measures.

“It emphasises the need for companies to take constructive steps towards mitigating fraud.” Establishing a code of conduct is the first step in the direction of effectively reducing fraud vulnerability and setting the proper “tone at the top”.

Around 96 per cent of the respondents agreed with this view and indicated that companies should have a code of conduct. Eighty-six per cent confirmed having a code of conduct in their companies. While having a code of conduct is imperative, its awareness, relevance to business needs and consistent compliance need to be monitored.

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