Cos may have to focus more on fraud risk management

NEW DELHI: Even as business leaders are aware of the need for addressing fraud and fraud-prevention initiatives, implementing a comprehensive and integrated approach to fraud risk management across the enterprise remains a significant challenge, says a new white paper by KPMG International.

According to the white paper, effective fraud risk management provides an organisation with tools to manage fraud and misconduct risk in a manner that meets regulatory requirements, as well as the entity’s business needs and marketplace expectations.

“In view of the changes in the regulatory environment by introduction of Clause 49 and other such regulations, the companies need to take a strategic approach to fraud risk management by aligning corporate values with performance,“ said Deepankar Sanwalka, head (forensic Services), KPMG in India.

He added, “Fraud risk management must become a part of the corporate culture. The board, senior management, internal audit, in fact all employees, have a role to play to ensure that the company is enacting and achieving ethical and responsible business practices.”

According to Adam Bates, international chairman, KPMG forensic, “An effective, business-driven fraud and misconduct risk-management approach has three primary objectives — prevention, detection and response. The challenge for companies is to adopt a comprehensive and integrated approach that enables all of the organisation’s control criteria in these three areas to work together.”

Prevention covers aspects like fraud & misconduct risk assessment, code of conduct, employee & third-party due diligence, communication & training. Detection includes issues like hotlines, audit & monitoring, and proactive forensic data analysis. While response will have to incorporate internal investigation protocols, enforcement & accountability protocols, disclosure protocols and remedial action protocols.