Handling Integrity Risks Post COVID-19
Economies world over are slowly opening-up after the extended lockdowns instituted to reduce the spread of COVID-19. Economists, policymakers and entrepreneurs are stepping towards restoring businesses progressively amidst the fears of an uncertain future that is relatively unclear about stabilisation and restoration. Workforces, investors, entrepreneurs, consumers and society at large are now resuming their roles alongside the risks that could impair their ability to resume with full force.
The risks that entrepreneurs need to handle are multi-fold while thriving towards resumption, stabilisation and growth. Historically, one of the risks that usually shadows uncertainty is the risk of reduced integrity in operations. What is important here that probably is a silver lining for some is that, while COVID-19 struck economies swiftly, its impact across countries, industries and sectors is varied. The impact is different based on the nature of industry and scale or size of operations of businesses. Governments globally are also taking measures to infuse growth to core sectors that drive the progression to other sectors.
Handling integrity risk post COVID-19 is challenging between the two extremes, one being the backdrop of uncertainty while the other being upcoming opportunities and support initiatives from governments. The breadth between the two extremes is highly volatile and the programs to handle the risk of reduced integrity, fraud and corruption, must be a set of carefully defined actions that are continuously monitored. Loss due to fraud is an unacceptable cost on operations today and is no more a point of theory and principle of corporate governance. The risk of fraud on industries that are majorly hit by COVID-19 can range between high impact misappropriation of assets to schemes of larceny. Enterprises should focus their efforts to safeguard their assets carefully while handling the pursuit of survival.
Enterprises that are relatively less hit and focusing on innovation and cost optimisation efforts could face the risk in the form of favouritism, corruption alongside asset misappropriation.
Enterprises taking support from government stimulus would have to be vigilant on investment avenues and misuse of funds.
Businesses focussing on taking advantages of new opportunities for growth would have to watch out for conflict of interest situations, corruption and challenges around the business and investment usage or diversions.
While the above risk sketch for businesses is a starting point, some important factors need careful consideration by entrepreneurs.
The impact of COVID-19 on businesses would be changing continuously over the next 6-12 months and so is the fraud risk sketch that they must manage.
The changes in lifestyle and spending habits triggered by COVID-19 would reduce the stress of fraud risk, however, the extent of it being a positive change is to unfold.
Technology being the saviour of the day with progressive resumption of operations comes with its own risk of cyber vulnerabilities.
The level of integrity accepted in these times is also the “new normal” and would set a benchmark for future. Restoring lost standards maybe next to impossible. The first thing business leaders should do to manage the risks of fraud in their organisations is to reject compromising on compliances for faster growth. The next step is to closely monitor the impact of COVID-19 on their businesses and assess the relative risk that needs to be managed and direct risk mitigation efforts appropriately. The current cost of compliances and risk mitigation should be weighed against the future costs and losses due to frauds.
