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  • It comes as a blow to the already limping IT sector.
  • The longer this slowdown continues, more such type of skeletons might show up.
  • The idea of corporate governance is good but the fault lies in the framework in which it is implemented and the subsequent enforcement in a company.
  • A comprehensive governance application will help in complying with regulatory mandates and gaining shareholders and stakeholder’s confidence.

 

It was a shocker of news that marked 7th of January for Indian IT sector, something which was not expected and which has shattered millions and broke the dreams and faith of many more. India’s fourth largest IT company,  which has won several national and international awards for its corporate governance and business expertise including the Golden Peacock twice is being blamed to have done the biggest fraud of corporate India.

 

India which holds a leadership position in the global offshore IT-BPO industry will surely get a dent on its image, though it is just an isolated case in the otherwise considered gentleman sector. This global economy meltdown might show many more of these as the cash flows have shrunk dramatically and hence it is getting more and more difficult to suppress the accounting fabrications. The longer this slowdown continues, more such type of skeletons might show up. And if this will be the case with few more of its counterparts then this is definitely not a good sign in present recession struck times.

 

But the positive outcome which would come out of this is strong corporate governance measures and even stronger regulations to force them into the system. Corporate governance are the set of processes, customs, policies, laws and institutions affecting the way an organization is directed, administered or controlled. These measures infuse transparency and accountability in the system thus strengthens the trust in management and controls the focus on value creation. The idea of corporate governance is good but the fault lies in the framework in which it is implemented and the subsequent enforcement in a company.

 

In view of this debacle, a lot of lessons should be learnt and a model for corporate governance should be put in place which promotes transparent and efficient markets, is consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities. This presses the importance of Governance, Risk and Compliance (GRC) in today’s world. The implementation model cannot be the same world over. Every country is different and hence while preparing a governance strategy, the culture and history should be taken into consideration, though transparency will always remain the key word followed by process control and access control.

 

Properly defined roles and access control over key information assets are the most effective safeguards against fraud and mistakes. These are prerequisites for a sound corporate oversight and are also required by various regulatory mandates around the world, such as the Sarbanes-Oxley Act. A comprehensive governance application will help in complying with these regulatory mandates thus gaining shareholders and stakeholder’s confidence. It would also become a parameter for vendor evaluation and clients around the world will analyze the governance measures being used in vendor’s organization before renewing of old and getting into new contracts with them. Hence choosing a proper governance application and proper implementation will require good understanding of corporate strategy as the application shouldn’t hinder growth and should also conform to various regulations and best practices in corporate governance.

 

This trend may not be only with the IT companies but it may spread to others industry sectors as well. And this will be a welcome move as companies will be well governed and more accountable to its shareholders and the stakeholders. Though forming and implementing governance strategies will need some serious effort but will surely be fruitful in long run. The companies which pioneer in implementing governance applications may also use it to their advantage and may help them in getting more business as they will be able to gather more trust  and have an edge in this cut-throat competitive and demanding environment.

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13 Comments

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  1. Aditya Varrier
    Hi,
    I feel its a sensitive topic to be discussed on such an arena.
    I felt SDN is not a place to highlight a company or de-highlight another.
    There are so many wonderful things to blog on like the best practices, technology, business processes, solutions.
    But since the blog was accepted by the SDN jury, my comment is refrained.
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    1. Marilyn Pratt
      Hi Aditya,
      This is important feedback, but my feeling is that much like in the cases of Enron, Tyco and Worldcom, which one could argue triggered an entire software industry around Sarbanes-Oxley, this topic will trigger important, postive, critical albeit difficult conversations around GRC.
      In fact, at this very moment, I was corresponding with another community member from another consulting firm who wanted to make sure the tide of conversation turned around auditing and not on finger pointing.  
      I entirely agree that participating in any conversation that brings about humiliation or is an act of name calling is reprehensible. But I don’t believe that it is the tone or spirit of the writer to do so here; rather to open a relevant conversation around Governance, Risk and Compliance as the topic is tagged.  Since SAP is in the business of creating GRC software this is a technology and business process and solution conversation that merits examination (as unpleasant as the trigger may be).
      We have begun a number of conversations this year around CSR and Sustainability.  That opened up some pretty heated discussions with folks like Dennis Howlett who inferred that one’s “Supply Chain” is a complex organism and you could be accountable by extension.
      I am very very grateful that the community has such comments as yours and seems to care deeply about its members and shows them solidarity rather than whatever the opposite of that solidarity is. I hope it doesn’t seem callous that I allow these postings to be posted around the event but to censor seems inappropriate and even wrong. 
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            1. Ignacio Hernández
              hi kartik be cool, this is a debate space, nobody is blaming to anybody, I saw some comments from you in other blogs, I recommend you go away to another better places in order to deposit your fury, I for example tried with karate, or meditation or even boxing in my past. I cannot say that SAP is open, but definitly I will defend open debate in this community.
              Regards,
              Ignacio.
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              1. Community User
                Dear Ignacio,
                karate, meditation and boxing are fine. Should anybody who despises mean comments about other peoples’ bad luck meditate? Or will it suffice if the people with opinions not shared by you shut up?
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                1. Community User
                  Kartik, speaking as the Community Manager of the SAP Developer Network I’ll ask you and the others to keep the conversations and debates civil. Based on your registration date you are very new to this community so it’s best not to get off on the wrong foot here.

                  Craig Cmehil
                  SAP Developer Network, Community Manager

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        1. Michael Nicholls
          Yes, kartik, let’s pretend nothing happened and that a massive fraud was not perpetrated which is going to affect many people in quite a few countries.
          That’s exactly the type of thinking that allows these type of things to continue to happen.
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    2. Debashish Sarkar Post author
      Hi Aditya,

      I agree to you that the forum is for discussion regarding BEST practices, technology, business processes and the solution which involve these.

      But there should be a driver for all these things to happen. And one of the driver for best practices is occurences of malpractices. So if malpractices are not scrutinised well and lessons not learnt from them, an even better solution cannot be developed.

      And if this happens, the probability of occurence of the same malpractices are even higher.

      This blog was to propel the thought of developing a better GRC application, which reduces the occurence of these cases and increases confidence of all involved.

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  2. Vijay Vijayasankar
    Where I come from, they have a saying ” if an elephant goes mad, you can chain him. But what if the chain goes mad?”.

    Just by implementing GRC software, we can only take care of the mechanics of the issue – you need some honesty and integrity to go with it. If auditors, board members and others who are supposed to watch out and prevent violations are part of the problem, then it becomes close to impossible to solve.

    Auditing the audit, is an important aspect in GRC systems.  But even at that, whoever watches the watchdogs is assumed to have honesty and integrity. A system can only go so far.

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