The procurement department is the biggest source of fraud in French companies operating in India, followed by the finance section, leading to an increase in the overall cost...
The procurement department is the biggest source of fraud in French companies operating in India, followed by the finance section, leading to an increase in the overall cost of doing business in the country, according to an international survey.
A survey among French companies operating in the country has also found that around 66 per cent respondents believe that this market demonstrates an imbalanced economic development, and 62 per cent of them say corruption has led to increase in the cost of goods and services.
The survey, conducted by EY Fraud Investigation & Dispute Services and the Indo-French Chamber of Commerce & Industry, said 70 per cent respondents cited purchasing department as having the highest risk function within a firm and being the most susceptible to bribes and kickbacks.
According to data from the French embassy, there are currently 1,051 French establishments linked to around 400 main companies present in India.
In addition, there are 180 independent French businessmen with their offices here.
“The finance department ranks the second with 14 per cent of respondents stating this function is also vulnerable due to the access they are granted,” Antoinette Gutierrez-Crespin, partner, Fraud Investigation & Dispute Services, EY France, told PTI here today.
It may be recalled that India ranks amongst the lowest, out of 184 countries, in a World Bank list on ease of doing business.
Around 56 per cent of those surveyed believed they faced losses in business due to unethical practices by competitors, while 62 per cent said third-parties present the biggest risk of bribery and corruption, 24 per cent held the management responsible for such risks.
Similarly, 44 per cent rated obtaining permissions as a source of corruption.
“France and India have very strong business ties and this is visible through significant investments being made in India. Operating in an environment outside one’s own geography does come with a few challenges. However, there are positive ways to overcome these challenges if both parties work together,” said Gutierrez-Crespin.
“Bribery and corruption concerns have risen to the forefront globally, and enhancement of regulations, enforcement and compliance are driving a changed mentality within the corporate world. India is charting a renewed course as well, and this resonance has been displayed through the findings of our report,” she added.
The French companies in India today employ around 3,00,000 people, up from 2,40,000 in 2013.
These companies have a turnover of more than USD 20 billion, up from USD 18.5 billion in 2013 and have a minimum stock investment portfolio of USD 19 billion against USD 17 billion two years ago.
Since 2003, 10 to 30 new French establishments are being set up in Asia’s third largest economy every year.
However, the survey noted that India has been demonstrating a keen focus on correcting its path through regulatory reform and more robust enforcement, which is echoed by those who participated in the exercise.
“The sense, however, is that these changed dynamics are percolating through to the global investor community at a rather sluggish pace. While they have highlighted a few gaps present in the system, the journey towards improvement has already begun,” Mukul Shrivastava, partner, Fraud Investigation & Dispute Services, EY India said.