Why the failure to implement sound risk management practices can place your company in a precarious position. By Akhil Prasad
Businesses have been familiar with risk management for a long time, but recent instances of corporate fraud raise the question of whether it merely exists as a theory, or do companies put it into practice. Large corporations tend to have strong risk mitigation practices, including dedicated manpower, consultants and advisers to develop risk-management models. However, when fraud occurs, their managers can still be left wondering why these processes failed to detect and prevent the risk.
Over the years, companies have adopted various risk management measures such as appointing independent directors, setting up vigil mechanisms, tasking committees to decide on executive compensation and investor grievances, and asking audit committees to review financial statements and operations. Yet, the incidence of fraud continues to grow.
For example, last year, Infrastructure Leasing and Financial Services (IL&FS), long recognized as among the country’s most respected non-banking finance companies, was at the centre of a corporate scandal when it was…
