Fraud-related cases on the rise in India’s M&E sector: EY report
As per EY’s M&E Fraud Survey 2014, 56% of respondents say that the Indian M&E industry witnessed an explosive rise in fraud-related cases over the last two years. 98% of respondents say unethical practices led to significant loss of profits & inflated costs
India has been beset with several scams in the last few years. So acute has been the problem that removing corruption was one of the election promises of the Narendra Modi-led Government.
India’s media & entertainment (M&E) industry has not remained immune to corruption cases. According to EY’s M&E Fraud Survey 2014, 56 per cent of the respondents said that the Indian M&E industry witnessed an explosive rise in fraud-related cases over the last two years.
One out of six respondents reported increased cases of fraud in their organisations. According to 83 per cent of respondents, kickbacks given for approval of talent-related and acquisition costs, carriage fees, Intellectual Property Rights (IPR) and satellite rights is another challenge faced by the industry. The effects of these hidden costs could see a far reaching adverse impact on the industry as well as the economy as a whole. 98 per cent of respondents said unethical practices led to significant loss of profits and inflated costs, while 83 per cent believed that kickbacks for approval of talent-related and acquisition cost is a serious cause of concern. 70 per cent said that false invoicing and overbilling by third parties is a serious issue.
The survey features insights of key decision makers in the Indian M&E space – companies with domestic operations as well as Indian and global multi-national corporations. It also reveals content distribution and TV/film content production, finance and advertisement sales functions as particularly vulnerable areas. The survey also highlights a high risk of facilitation and unethical payment in segments which mandate Government approval.
In a release issued, Mukul Shrivastava, Partner, Fraud Investigation & Dispute Services, EY said, “The war against fraud, bribery and corruption risks have leapfrogged and slices across sectors, geographies and economic conditions. Being on an upward trajectory, the Indian M&E sector is increasingly victimised by the growing challenges around governance breakdowns and unethical practices. This has led to extensive losses (monetary and reputational), sub-par performance and arrested development. In light of the changing industry dynamics, organisations will have to improve vigilance, boost internal controls and raise compliance benchmarks for sustainable growth.”
Farokh Balsara, India Media & Entertainment Sector Leader, EY said, “As companies in the M&E sector increase in size and move from unorganised to organised operations, the need for proactive fraud prevention has increased. The adoption of an ethical business conduct and sound governance policies will play a crucial role in determining its true success.”
Health checks to thwart bribery and corruption are inadequate
Organisational principles and good practices always tend to trickle down from the top. The survey indicates that despite mounting risks, communication from the corner office to spread awareness and conduct trainings remains insufficient. 67 per cent of respondents say that their organsations did not deliver training on anti-bribery and anti-corruption (ABAC) policy to their employees and vendors. With threats related to third parties (such as dubious or non-existent vendors) on an uptick, alarmingly 59 per cent were unaware that organisations are jointly responsible for the unethical actions of the former. Only 13 per cent of the respondents indicated their companies conduct audits of third parties.
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