How to promote business ethics and manage fraud risks

Businesses are in a focal position to influence ethical practices amongst employees as well as value chain partners. Strong corporations can drive the wheel of change even in instances where unethical practices are widely rampant in the larger ecosystem. As the fraud risk landscape grows in magnitude and complexity with fast-changing technology and data security concerns, there is a need for corporations to build comprehensive strategies to mitigate fraud risks and related losses. The following strategies have proven to be most effective for promoting business ethics and managing fraus risks-

• Setting the right tone at the top

The senior management sets the tone at the top for employees to follow by adopting policies and processes that reflect their ethical values and ensure compliance with regulations. These policies and processes must address concerns of bribery & corruption, money laundering, conflict of interest, disclosure of confidential information, and other fraudulent practices that may pose financial, legal, and/or reputational risks for the company. The management may conduct proactive fraud risk assessments to identify areas vulnerable to unethical practices and implement preventive as well as detective controls to mitigate such risks. An efficient governance structure must be established to monitor fraud risks and related concerns.

• Training employees to manage ethical dilemmas at the workplace

Employees need to be trained on the code of conduct and related ethical policies at the time of hiring and must be reminded of appropriate business conduct on a timely basis throughout their tenure with the company. Ethical dilemma workshops may be conducted to help them manage practical concerns that may arise while discharging their duties. Employees may also be educated regarding the consequences of non-compliance with policies.

• Encouraging employees and value chain partners to speak up

Most frauds are identified due to tips and it is critical to set up a whistleblower hotline where employees can raise their concerns. Employees must be encouraged to speak up against any ethical concerns without any fear of retaliation. Here, it is of utmost importance to enforce an effective whistleblower protection policy.

• Timely investigation and consistent action against wrongdoers

For any allegation involving an ethical concern, a fair investigation must be conducted in a timely manner. The subjects of the investigation must also be provided with an opportunity of being heard. Any employee action or remediation measure must be consistently enforced in an unbiased manner.

Despite best efforts, it may not be possible to entirely prevent fraud scenarios. But every effort made by a corporation to build an ethical workplace goes a long way in improving employee morale, trust amongst value chain partners and creates a positive image in the eyes of the customers and society at large.