- 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.
