India’s Economic Survey 2019-20 presented ahead of the Union Budget anticipated a modest growth outlook, projected between 6–6.5% and driven by several reforms to enhance the country’s financial health, augment domestic demand, and boost revival. However, the path ahead is laced with many risks. The COVID-19 outbreak has unleashed fury across the globe, impacting millions of human lives. Global as well as India economic growth have seen an adverse impact amidst an already tepid market outlook, resulting of a sharp fall in markets worldwide, plunging stocks, shrinking exports, and business interruptions and lockdowns. While the risk appetite of companies dwindles, some of the other challenges ahead include market uncertainties, geopolitical tensions, international trade restrictions as well as fraud and corruption.

Earlier this year, Transparency International released the Corruption Perception Index 2019 which saw India slipping two ranks from last year, standing at 80 out of 180 countries, while the score remained stagnant at 41. The report further analysed that several countries did not show any major change in the level of corruption since 2012. This is quite alarming given today’s volatile environment where many businesses are struggling to handle internal and external threats. With this background, EY’s Forensic Outlook 2020 lists key trends for organisations to demonstrate integrity, empower people and innovate to secure the future.

New risks in a transformative age

2020 will see the resultant impact of potentially adverse factors such as the Brexit, rising debt levels, economic and political instability in many regions. As per OECD, the COVID-19 outbreak is pushing the world “into its worst downturn since the global financial crisis”. Organisations will have to consider reassessing contract clauses and obligations to understand the risk exposure, and evaluate potential issues around financial disclosures, insurance claims, claims for force majeure and disputes. Accelerated data proliferation and hyper connectivity is also leading to greater cyber and online risks, with hackers selling customer data as well as capitalising on the ‘fear factor’ during phishing attacks. For example, certain countries will see a rise in cyber-attacks led by COVID-19 fears.

Ethical strategies led by refreshed CXO roles

Recent regulatory developments have enhanced the role and powers of senior management, but at the same time, exposed them to several unknown risks. 2020 will see a refresher in the behavioural angle, compelling CEOs to shift from an aggressive “succeed at any cost” mindset to a strategic and purpose-led stance. As one of the strongest pillars of corporate governance, independent directors will have to take a step ahead, and not take a step back, and CIOs will be playing a key role in making sure that ethical boundaries are not overstepped when handling personal data of their stakeholders.

Growing stress on the banking and financial services sector

One of the major challenges faced by resolution professionals has been evaluating past transactions for any irregularity or under/over statement of potential liabilities. In 2020, identifying these transactions with help of forensic auditors will continue to be key for all the cases referred under the Insolvency & Bankruptcy Code (IBC). With the focus on combating rising bad loans and fraudulent borrowers intensifying, and the plethora of changes envisaged, recovering bad loans through the IBC will continue to be a key economic activity. Banks will also consider sizeable investments in implementing technology enablers to consolidate a digital profile of customers, analyse their behaviour and detect divergent patterns, coupled with risk scoring to detect fraudulent transactions and reduce false positives.

Technological play in a data driven ecosystem

In 2020, the role of Data Protection Officers will gain prominence as they will be entrusted with overseeing the organisation’s data privacy and protection strategy and be responsible for compliance with the proposed law. As CIOs and CTOs will look to embrace blockchain and drive digital transformation, enhancing compliance to mitigate fraud risks and strengthening cybersecurity will be a priority. While blockchain will be instrumental in fighting fraud, establishing trust and enhancing transparency, the systems are ultimately as good as the data fed into them. 2020 will see also process mining being used increasingly in forensics to assess potential revenue leakages and weaknesses within the current processes.

Need and relevance of integrity checks

Today’s competitive corporate world has organisations vying to hire the best talent who can actively contribute to its growth objectives. But the urgency to on-board a potential candidate can turn out to be a risky proposition if adequate due diligence is not carried out. 2020 will see extensive use of technology to drive employee integrity checks, as opposed to manual ways to reduce costs and improve the turnaround time. This will be particularly important in a COVID-19 affected environment wherein virtual interviews and digital on-boarding are the need of the hour. New technology tools and dashboards will be used extensively and be tracked on recruitment and operational metrics. Integrity checks will help in making informed hiring decisions, have companies invest in the progress of the right quality of resources and enable fostering a secure working environment.

Views are personal.

The author is Partner and Head - India and Emerging Markets, Forensic & Integrity Services, EY

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