The break-neck speed at which India Inc engages in cross-border mergers and acquisitions comes with a flip side ? it leaves companies vulnerable to economic frauds and crimes while in the process of integration.
Ashwini Puri, executive director, PricewaterhouseCoopers (PwC), said the process of integration of operations left the companies susceptible to frauds and economic crimes, especially as they got exposed to new environment and regulatory framework. ?These deals are excellent breeding ground for frauds to take place. Its a high risk environment,? Puri told FE after he released PwC’s fourth Biennial Global Economic Crime Survey.
Puri said the possible areas of economic crimes/frauds that arise from M&As are related to cultural differences between the two economies, different financial reporting systems and also due to efforts at rationalisation of human resource.
?People can do fraud as they feel justified to do so since they may suffer during manpower rationalisation as there are bound be shake-ups,? he said.
Puri pointed out that while due diligence may well take care of a target company’s internal position, it does not give a fair idea of its acquired company’s vendors and other crucial business partners, making such M&As susceptible to frauds as critical information could have been suppressed from them.