Impact of Organization’s Fraud on Employee

April 10, 2018 By Samir Halder

Impact of Organization’s Fraud on Employee

Since independence India have witnesses lots of financial scams. A study suggested that during 2008-10, the financial fraud had impacted around 87 percent of Indian companies where more than 75 percent of Indian companies said that fraud had increased gradually. (1) According to an estimate more than 20.23 Trillion US Dollar had been lost due to financial fraud since independence. (2)

Whether, it was Harsh Mehta Scam, Satyam Scam of around Rs.8000 crores, Saradha Chit Fund Scam in 2013 of more than Rs.4000 crores or recently PACl Scheme Scam of around Rs.47000 crores, the list goes on and on. (2) As most of the companies believes that manual process control and internal audits were adequate to prevent from fraud, which results to detect fraud for almost months or even years the frauds were committed. (3)

According to a report presented by Enforcement Directorate, more than 84 percent of fraud committed in India were related to Financial Institution and Real Estate firms. (4) Enforcement Directorate further added, around 3548 cases had been registered against money laundering in last year with total value assert of more than 9935 crores. (5)

Moreover, according to another report presented by Financial Intelligence Unit, the cash transaction during 2015-16 had doubled by 2014-15 and also many cases against money laundering had been filed. (6) Despite of Government initiative to reduce financial frauds in India, it was not easy task to remove corruption from Indian economy. (7)

The impact of financial fraud had devastating effects on companies as they had to suffer from financial losses, decreased in public trust and even increased in financial audit expenses. Also, financial fraud impact negatively towards company’s moral and culture. Sometimes it becomes hard for the employees of the fraudulent company to find next place of employment, even if they were not involved with the fraud at all.

A study was conducted to find the perception about employees of the fraudulent companies toward getting new employment in other companies. Data was collected from the sample size of 366 HR respondents from micro to mid-sized companies (companies with maximum 100 employees) within West Bengal. The following is the distribution of the responses:

The respondents were asked whether they will allow any employee (with similar job position) who had employed previously in a company which had been accused to be a fraud company. They were asked to provide responses base on the following conditions:

1. Whether the respondent would allow a person to work in his/her organization in general position with working agreement (at least 6 months)?

2. Whether the respondent would allow a person to work in his/her organization at bottom level employment position?

3. Whether the respondent would allow a person to work in his/her organization at mid-level level employment position?

4. Whether the respondent would allow a person to work in his/her organization at top-level level employment position?

S. No.

Conditions

YES

MAYBE

NO

1

General Emp.

96.17%

3.01%

0.82%

2

Bottom Level Emp.

98.36%

1.64%

0.00%

3

Mid-level Emp.

57.65%

35.52%

6.83%

4

Top-level Emp.

26.78%

61.75%

11.48%

Table1: Distribution of responses (in percentage).*Emp.- Employment

From the above table (Table 1), more than 96 percent of respondents suggested that they would like to employ a person whose previously organization had been accused to be a fraud company, to work in his/her organization in general position with working agreement (at least 6 months). While most of them further suggested that the employee had no hands in faulty management practice within the organization. Moreover, many of the respondents had hired similar types of employees within their organization.

Around 98 percent, 57 percent and 26 percent of respondents showed positive response on employing person whose previously organization had been accused to be a fraud company, to work in his/her organization at bottom level, mid level and top level positions respectively. However, after interviewing 22 employees who had struggled due to shut down of their organization due to fraud where all of them suggested that they felt difficulties in finding new employment.

Most of them also suggested that their salary had decreased up to 45 percent while the work remains same in new organization. Some also suggested that they had exploited by working long hours. While few of them were forced to work at lower designation or without any official employment agreement or any employee benefits etc. Lastly, they all had to deal with the negative attitude of society despite the employee had no fault in organization fraud practice.

References:

  1. Narayan, K. (07th Apr. 2010). Financial fraud hit 87% of Indian companies in past two years. Live Mint. Retrieved from http://www.livemint.com/Companies/pvQ9J3IBGSRsbiKpW0Y3pN/Financial-fraud-hit-87-of-Indian-companies-in-past-two-year.html on 15th Nov. 2017.

  2. Pathak, S. 10 Biggest Corporate Scam of India. The CS Club India. Retrieved from https://www.thecsclubindia.com/10-biggest-corporate-scam-of-india/ on 15th Nov. 2017.

  3. Edwin, T. (28th May 2012). Corporate fraud: Most common threats and how it’s done. The Economic Times. Retrieved from https://economictimes.indiatimes.com/news/company/corporate-trends/corporate-fraud-most-common-threats-and-how-its-done/articleshow/13531323.cms on 15th Nov. 2017.

  4. Thakur, P. (20th Nov. 2017). 74% of all cases registered by ED on fraud, graft. The Economic Times. Retrieved from https://economictimes.indiatimes.com/news/politics-and-nation/74-of-all-cases-registered-by-ed-on-fraud-graft/articleshow/61718369.cms on 20th Nov. 2017.

  5. ED probing over 3,700 money laundering, FEMA cases post note ban. (09th Nov. 2017). The Economic Times. Retrieved from https://economictimes.indiatimes.com/news/politics-and-nation/ed-probing-over-3700-money-laundering-fema-cases-post-note-ban/articleshow/61577235.cms on 20th Nov. 2017.

  6. Suspicious Financial Transactions Doubled Last Year, A Government Report Says. (30th July 2017). NDTV Profit. Retrieved from http://profit.ndtv.com/news/economy/article-suspicious-financial-transactions-doubled-last-year-a-government-report-says-1731132 on 20th Nov. 2017.

  7. Why it is not easy to remove corruption from Indian businesses. (06th Nov. 2017). The Economic Times. Retrieved from https://economictimes.indiatimes.com/wealth/plan/why-it-is-not-easy-to-remove-corruption-from-indian-businesses/articleshow/61506966.cms on 20th Nov. 2017.

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ABOUT AUTHOR

Samir Halder is an entrepreneur, business strategist and HR Professional. He studied business at United Business Institutes, Belgium and proceeded to work in a fast, upscale environment, assuming client delights on business innovations management.

 

# business strategist     #HR professional     #entrepreneur     #dreamer

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