Fraud risks jump by 56% in M&E sector over last two years – EY survey

EY-LogoBangalore, India, August 13, 2014: 56% of respondents say the Indian Media & Entertainment (M&E) industry witnessed an explosive rise in fraud-related cases over the last two years, states EY’s M&E Fraud Survey 2014 released today. One out of six respondents reported increased cases of fraud in their organizations According to 83% 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.

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.

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 victimized 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, organizations 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.”

Securing data and enhancing privacy standards

Today, most organizations are leveraging the benefits of technology and providing immense flexibility to users. The downside is an augmented risk of confidential and sensitive information being compromised. Insider threats are more likely to have a negative impact on the business as compared to external ones. The survey states that 76% of the respondents have easy access to personal emails and networking websites. While 50% say that they have undertaken multiple checks to secure their IT networks, only a minority (26%) have instituted penalties in case of information leakage by employees.

Health checks to thwart bribery and corruption are inadequate

Organizational 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% of respondents say that their organizations 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% were unaware that organizations are jointly responsible for the unethical actions of the former. Only 13% indicate their companies conduct audits of third parties.

Chalking a roadmap for compliance

Organizations’ internal audit departments are increasingly seen as a corporate wall against risks related to fraud. Supplementing them are external specialists or advisors that bring in added competencies to implement an effective compliance management system. However, the survey results suggest that only 24% have regular reviews conducted by external law firms or specialist consultants. 57% are yet to setup a whistleblowing mechanism to protect the company’s interests and 41% have minimal knowledge about anti-corruption laws such as Foreign Corrupt Practices Act, UK Bribery Act and local regulations. Regular training, awareness programs, interactive sessions with case studies and scenarios are expected to be strategic enablers in institutionalizing a robust fraud risk management program.

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