Indian Inc needs effective whistle-blowing framework, says EY

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Indian firms are still to make a significant headway for having an effective whistle-blowing framework, as only a few entities are fully complying with the provision under the new Companies Law, says a survey.

The survey by consultancy EY also found that 22 per cent of the respondents had implemented the whistle-blowing framework because they considered the structured mechanism integral to their business operations.

Even though a majority of respondents assented to having a whistle-blowing mechanism, EY found that only about 13 per cent of them were fully compliant with the relevant provisions in the Companies Act, 2013.

Under the Act, certain class of companies are required to have vigil mechanism.

"While many organisations had a policy in place, half of the respondents offered only one channel for reporting of complaints... Only half of the respondent organisations had implemented hotline as a channel of reporting," EY said while releasing the survey today.

More than 80 executives participated in the survey that was done from April to June this year. The respondents, spread across sectors, were senior executives from various domains including internal audit and legal.

They represented domestic entities as well as Indian subsidiaries of multinational companies with annual revenues ranging from up to Rs 5 billion to Rs 100 billion.

"India Inc still needs to make significant headway to benefit from an effective whistle-blowing frame work," Arpinder Singh, Partner and National Leader, Fraud Investigation & Dispute Services at EY said.

Going forward, it is necessary for the management to pay more attention to the intricacies of the framework through efficient monitoring, support and oversight and most importantly, establishing a robust fraud response plan, he noted.

Around 56 per cent of the respondents indicated that "less than 25 per cent of the complaints reported the need for further investigations.

"This indicates that majority of the complaints received were not within the scope of whistle-blowing. Lack of clarity on the purview and inadequate training can be major deterrents in establishing an effective mechanism," EY said.

In terms of sectors, the survey found that automotive and telecom are able to derive greater benefits from implementing a whistle-blowing mechanism as compared to others.

This appears because the organisations surveyed were led by global mandates and the nature of investments seemed to incorporate leading practices, it said.

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