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Pay hefty, become part of an IIM brand – Rediff.com Business

It will soon no longer be necessary to be a Nobel laureate or a pioneer in a discipline to get a gold medal at an Indian Institute of Management (IIM) to be named after oneself.

An interested party needs to only be willing to part with Rs 25 lakh and the coveted gold medal will bear the name of the individual or corporate donor for 10 years, when the scheme at IIM Ranchi becomes operational, says director M J Xavier. His officials said Bokaro Steel and JSW Steel had already sent feelers in this regard.

The donor will not just be a sponsor of the medal but the award, given to academic achievers, will be named after the donor as well.

How to Protect Your Business Against Fraud | Reputational Compliance

How to Protect Your Business Against Fraud

ReputationalCompliance March 19, 2012 0

Elizabeth Wasserman

Smaller firms, unfortunately, can be highly susceptible to incidents of fraud. Here’s some advice on protecting your company and instituting a policy to prevent external (and internal) theft.

The amount of fraud being perpetrated against businesses is getting worse, both in terms of the number of instances and the amount of money that is being lost, and some of that can be attributed to worsening economic times, according to research. Almost half of the companies around the world surveyed by PriceWaterhouseCoopers (www.pwc.com) in 2009 reported that they suffered one or more instance of economic crimes. The survey, which involved 3,000 executives of businesses large and small in 54 countries, found that 88 percent of U.S. companies that reported some type of fraud also reported declines in financial performances. In addition, three-fourths of the crimes against businesses in the U.S. were carried out by insiders.

For small and mid-sized businesses, the vulnerability to fraud can be compounded because of the sometimes informal nature and the fact that fewer staff members can result in less oversight — and a lack of checks and balances.
‘Small businesses tend to be very informal in nature. A lot of times they’re either formed with friends or family members, and all the formalities are not in place as they would be in a larger business,’ says Elena N. Lougovskaia, co-founder of Lougovskaia Boop, LLC (www.lougoboop.com), a law practice in Cleveland, Ohio, focused on business law and commercial litigation. ‘Employees wear many different hats and perhaps decision makers should be separated from people who sign the checks or one person should be responsible for signing check and a separate person should be responsible for accounting, processing invoices, and purchasing.’

The following pages will cover the types of fraud against business, how to detect fraud in your business, and how to set up policies and procedures to prevent your business becoming a victim of fraud.

How to Protect Your Business against Fraud: Types of Fraud against Business

The media is filled with stories of consumer victims of fraud.  But the reality is that businesses, especially smaller enterprises, are more often the victims of fraud than consumers.  The types of fraud can vary wildly, from accounting scams carried out by employees to fraudulent returns from customers to data theft by outsiders. Businesses have less protection than the consumer and, in some cases, can be held responsible in a business fraud scheme, owing liability to banks, shareholders, insurers, credit card processors and other entities. New laws also hold businesses accountable for liability in the event of some types of fraud perpetrated by third parties, such as data breaches.

Sources of Business Fraud
In order to understand the types of fraud that your business may be vulnerable to, you must first understand the different sources of these crimes. Most professionals agree that the top sources of business fraud, ranked in the order of frequency and cost, are as follows:

Employees and Officers
In previous surveys, PriceWaterhouseCoopers had found that the sources of crimes against business were evenly split between insiders and outsiders. But in the 2009 survey, the numbers tipped in favor of insiders carrying out the majority of crimes — in 76 percent of the cases in the U.S., according to the survey. The increased financial pressures in many companies have also prompted a rise in the amount of fraud committed by middle managers, which now accounts for 42 percent of internal frauds globally from 26 percent in 2007, the survey found. Meanwhile, the Association of Certified Fraud Examiners (ACFE) (www.acfe.com) estimates that business organizations lose 5 percent of annual revenue to fraud by employees and officers.

‘Managers and small business owners have a tendency to trust their employees to a higher degree and, because they are doing more, they may not be as detail oriented as they should be,’ says Allan Bachman, education manager for the ACFE. ‘That level of trust is often betrayed. Sometimes employees start taking advantage of the fact that the boss isn’t looking and thinks I’m doing a great job.’

The most common types of insider frauds include theft of assets and accounting frauds, but this type of crime can also include other categories, such as fraudulent worker’s compensation claims. ‘If you’re in a no-fault worker’s compensation state, as long as they’re injured within the scope of employment, they can receive compensation for their injuries,’ Lougovskaia says. ‘That’s an area where employees could be taking advantage.’

Employees, managers, and directors have the inside track and understand how a business works. That’s why they are able to perpetrate so many different types of schemes — and how they can often go undetected. Bachman says that the biggest source of insider fraud against businesses involves purchasing and procurement of goods and supplies. Insiders may be buying more goods than a business needs and lining their own pockets or paying invoices to an external third party for fraudulent orders. Other common schemes, says Bachman, include creating fictitious vendors or no-show employees — who get paid for doing nothing. Accounts payable is another area where insiders may be skimming money by taking cash payments and failing to report them or replacing today’s payments with cash paid at later dates.

Customers can also be notorious for trying to perpetrate fraud against businesses. Whether writing bad checks, using stolen credit cards, returning items not purchased from a business, or filing fraudulent injury and liability claims, there are a whole host of schemes that customers can perpetrate that will cost your business money.

‘This is a very litigious society, so if you own a store or surface where customers walk or you have a parking lot, you are susceptible to people claiming they fell and injured themselves,’ Lougovskaia says. ‘If you don’t have any surveillance and safety procedures in place, you are susceptible to frivolous liability complaints.’

False return schemes are another type of fraud that tends to impact retailers. People sometimes bring back merchandise from one store to another or they bring back merchandise that has been used. ‘I’ve seen frauds where someone walks into a store and bought three pieces of merchandise, went out to their car and put the merchandise away, and came back into the store and picked the same stuff up and put it in a bag and walked out with it,’ Bachman says.

Businesses are often the target of unscrupulous contractors’ overcharging, over billing, kick backs, failing to perform contracted work or service, and other actions.

Some vendors you hire may try to scam you by billing for work they never complete. ‘I can come into your company to provide carpet cleaning and you give me the alarm code and I come in once a month instead of once a week but bill for providing the service once a week,’ Bachman says. ‘Of you can short out services or goods because no one is paying attention. You order 50 chairs and I send 45. There are a lot of different ways of doing this.’

Third-Party Attacks
A growing number of types of fraud are being perpetrated by electronic means.  Hacking, slamming (changing your telephone service without your knowledge), phishing (acquiring user names, passwords, credit card information), identity theft and other forms of business fraud are some of the most difficult to control. More businesses are being held accountable for data breaches perpetrated by third parties, as 45 states, the District of Columbia, and some U.S. territories now have laws on the books requiring companies to notify potential victims if their personal information has been stolen or otherwise compromised.

How to Protect Your Business against Fraud: How to Detect Fraud

Given that fraud against your business can impact the bottom line, it’s important to set up procedures to verify adherence to anti-fraud policies and to detect and deter possible business fraud. Lougovskaia says business executives should commit to talking control by developing an enterprise-wide, anti-fraud policy that:

  • Verifies that anti-fraud work practices are followed and detects fraudulent activity.
  • Develops written procedures that dictate work processes in critical areas.
  • Institutes checks and balances and divides key responsibilities.

Below are several ways to deter and detect fraud in your business:

Employee Tips and Reporting
An often overlooked, but excellent way to prevent fraud is to develop an anonymous way for employees to report suspected fraud and work practices that lead to fraud.  Businesses that institute anonymous employee reporting detect fraud earlier and significantly limit financial losses. ‘You could have an anonymous tip box,’ Lougovskaia suggests. If you do opt for a tip box, you should take steps to ensure that the process isn’t abused to settle personal grudges. One way would be to appoint one individual to investigate all claims and ensure that anonymity is protected.

Internal Audits and Surprise Audits

Work processes, inventories, and accounting should be subject to regularly scheduled and announced internal audits.  In addition, unscheduled — or surprise — internal audits also should be conducted.  Work processes, inventories, and accounting can be altered in advance of regular audits, but knowing a surprise audit may occur removes temptation and increases the chance for fraud detection.

External Audits

At a regular interval, external auditors should be employed to review company accounts, contracts, inventory and work processes, Lougovskaia says.  Depending on the size of your business and whether it is a publicly-held enterprise, this may be required by law.  Thus, it makes sense to set up external audits early in the history of your business so compliance with applicable laws and regulations can be achieved as your business grows.

How to Protect Your Business against Fraud: How to Deter Fraud

There are ways to deter fraud. One of the most important steps a business can take is to create a system of awareness at the top level of management. ‘Never think that it can’t happen here,’ Bachman says. ‘Create a level of awareness throughout the organization that we’re watching for it. Make it clear in terms of deterrents that, if we catch it, we’re going to prosecute, both criminally and civilly.’ Civil action may be needed because people who have profited from ill-gotten gains may not have the cash on hand to return – they may have bought items, such as fancy cars or jewelry.

Written procedures are necessary to develop internal consistency and to insure adherence to anti-fraud work practices and policies.  At a minimum, the business should take the following steps:

  • Hiring practices and background checks. Background checks should be a precondition to employment.  The business should secure written permission to conduct such investigations, which should include criminal background investigation, verification of education, right to work, licensure and past employment, Lougovskaia says.  A credit check should be performed on employees who will handle cash or inventory.
  • Cash and receivables and accounting. A written cash and receivables handling policy should accomplish two goals.  It should train employees to spot bad checks, counterfeit currency, and stolen credit cards and insure proper accounting.  ‘The policy should address possible discipline for cash shortages and failure to strictly follow handling guidelines,’ Lougovskaia says.  The policy should address the use of customer-provided information and the handling of vital customer data.
  • Inventory handling and tracking. A written inventory policy covers sales stock and company equipment. Pilferage is often an ‘entry level’ criminal enterprise.  Contractors and employees engaged in this activity often perceive a weakness in inventory controls as an indication that fraud will not be detected. ‘What happens to those items from the time they get off the truck to the time they hit the store shelves?’ Lougovskaia says. Put those procedures in writing and give them to employees.
  • Contract and invoice reviews and procurement. Regular reviews of accounts payable invoices, purchase orders, and payments can eliminate various types of fraud.  It is important for small businesses to be able to verify that contractors have performed the work that they bill for — before paying the invoice from that contractor. ‘You need to outline billing practices with your contractors and require them to itemize billing, including the names of employees involved and listing a quarter hour itemization for each task,’ Lougovskaia says. ‘You need to provide better oversight and you need to have it in writing.’
  • Critical data and corporate information. These days, every business that keeps sensitive data — whether about customers or employees or the company — need to have written data handling policies. These policies should spell out who has access to vital information, passwords, account numbers, databases, etc. Document retention policies should include scheduled, mandatory shredding of certain documents containing employee information or corporate data.  Use confidentiality agreements and non-compete agreements for key employees.
  • Customer returns. Customer returns can be a significant source of fraud.  Since most state consumer laws require a posted customer return policy, it makes sense to develop a written return policy that will eliminate fraud risk, Lougovskaia says.  Elements of your policy might include that you require returns to take place where the item was purchased, require a receipt, and do not issue cash refunds for credit card or check purchases.
  • Visitor/customer injuries. There are ways of deterring fraudulent customer claims of accidents or incidents involving your business property. Retail establishments should consider installing video surveillance systems and having a handheld video camera ready in the event a customer falls on the premises to protect your business. If your business is not a retail establishment, you might consider requiring visitors to sign in and wear clearly identifiable badges.  Tracking customer claims of injury via incident reports, and training employees to create reports immediately, cuts down on fraudulent injury claims.
  • Internet, e-mail, laptops, cell phones, and storage devices. Clearly defined policies need to establish that Internet access and e-mail remain the property of the business for business purposes.  Eliminate all employee access to non-work e-mail and Internet sites, Lougovskaia says. Written guidelines addressing the use of business laptops, cell phones, and storage devices will reduce the possibility of critical corporate and customer data being lost or stolen.

How to Protect Your Business against Fraud: Creating Checks and Balances

Internal controls are one of the great fraud deterrents. Internal controls involve the processes by which a business operates and goals are achieved. In accounting, it refers to the reliability of financial reporting and compliance with laws and regulations. Setting up good controls is important for a business to detect and deter fraud.

‘A lot of organizations have an internal audit department, but small organizations can’t always afford that luxury,’ Bachman says. ‘But they do have accountants and other people in charge of keeping track of accounts.’ However, small businesses may have some weaknesses in terms of controls, such as putting the same employee in charge of making deposits and reconciling bank statements. Allowing one employee/department to perform multiple critical functions is inconsistent with preventing fraud. By dividing the responsibility of certain functions, a system of checks and balances is created and this creates an environment where fraud is less likely to occur. Lougovskaia says businesses should consider the following examples to establish better checks and balances:

  • Separate the person/department writing the checks from the person/department that reconciles the bank statement.
  • Do not let the person initiating a purchase order approve the payment regardless of position within the company.
  • Separate the functions of creating databases, maintaining databases and using the data.  For example, the person responsible for generating payroll checks should not be entering employee data.
  • Require separate confirmation and storage of inventory records away from the location of the inventory and rotate responsibility for taking inventory.
  • Assign administrative access to the business data, web site, intranets, and email accounts to different individuals.

Implementing a fraud prevention plan requires commitment and also requires the business to provide the right tools and support to its employees. Businesses are better off if they build in deterrents, establish good controls, and provide oversight. It’s also important to encourage employees to have a conscientious attitude, says Bachman, such as: ‘Our business’ survival depends on employees being honest.’

Source: inc

Difference Between Business Ethics and Social Responsibility | Reputational Compliance

Difference Between Business Ethics and Social Responsibility

ReputationalCompliance March 12, 2012 0

Business Ethics vs Social Responsibility

Business ethics and social responsibility are commonly used in everyday parlance almost interchangeably. While social responsibility is self explanatory, ethics is a word that puts one in a dilemma. Social responsibility looks clearly defined and demarcated. Companies have a policy of social responsibility known as corporate social responsibility whereby they commit to follow their businesses in such a way so as to benefit the community at large. But ethics is a loose term that is dependent upon a person’s conscience. There are certain differences between the two and the two are not overlapping completely.

Business Ethics

Before we move to business ethics, we need to spell out clearly the word ethics. Derived from ancient Greek word ethos, ethics has come to mean moral character. Ethical behaviour is what is good or right. Ethical senses always make use of good, bad, right and wrong. Applying this definition to business, we come to a conclusion that though the primary objective of any business or company is to maximize the profits to shareholders, stakeholders also need to be kept in mind, they are directly or indirectly affected by the decisions taken by the company for the operation of business.

Business ethics is the behaviour of any business that it indulges in its dealings with the community or society. For some, making money is all they are interested in, and this is capitalism in its dirtiest form. These people are least concerned with the bad effects of their business practices and the harm they are doing to the society at large.

When companies do not engage in good business ethics, they are penalised by the law. But such cases are rare and the profits of companies engaging in unethical behaviour are far more than these punitive fines.

Social Responsibility

Man is a social animal and cannot live in isolation. He is expected to behave in a manner that is socially and morally acceptable to others. The same applies to businesses. Though the primary objective of any business is to earn maximum profits for the owners and shareholders, it is also expected to conduct its operations in a manner that it fulfils its social obligations also. For example, though it is not binding on any private sector company to provide employment to the disabled or weaker sections of the society, it is considered to be a part of the social responsibility of the company to absorb people from such sections of the society. Similarly though there is not written law to compel a company to engage in acts to do something to reduce pollution or to do something for the betterment of environment, taking up projects to clean up environment are considered to be a part of the social responsibility of the company.

Difference between Business Ethics and Social Responsibility

Though business ethics and social responsibility seem to be overlapping, there has always been a contradiction between the two. Companies, though they are committed to be socially responsible for their behaviour have been found to be engaging in acts that cannot be called ethical.

What is good for the society is sometimes not good for the business, and what is good for the business is almost always not good for the society.

If the society is conscious, it responds in such a way that businesses are forced to behave responsibly. The same applies to the administration and the judiciary of any country.

Selling of liquor and tobacco in any society is not against business ethics though it may be against the principles of social responsibility. The same applies to lotteries and gambling. But it is certainly against business ethics as well as against social responsibility to entice minors to engage in smoking and drinking.

Source: differencebetween

Stop Talking About Social and Do It – Nilofer Merchant – Harvard Business Review

“Leadership” has changed when a decentralized group of people can take down a government. “The Value Chain” has changed when the customer is no longer just the “buyer” but also a co-creator. “Human Resources” have changed when most of the people who create value for your organization are neither hired nor paid by you. “Competition” has changed when individuals can create value through a centralized network of resources: for example, designing a product from anywhere, producing it through a 3D factory, financing it through community and distribution from anywhere to anywhere.

Yet our business models have not changed to keep pace with these shifts.

This five-part series has shared case studies and examples of how the social era affects all areas of the business model: how we create, deliver, and capture value. (See part one, part two, part three, and part four.)

Here’s a quick visual summary of what we’ve covered so far:


These changes are not transitory or reversible, but fundamental and irrevocable. The social-era models are inherently more fast, fluid, and flexible than the models that preceded them. The big question is: how are we actually going to do this thing?

And it is a huge question: it is a life’s work-sized-question that can’t possibly be answered in a blog post, or even a series of posts. But I can offer three actionable, thought-provoking exercises that you can start with, today:

From paid to purpose-driven. In the social era, purpose precedes scale. And as we discussed in part two of the series, shared purpose allows many communities to engage with you — without you having to invest resources in controlling their actions. When TED unleashed TEDx, they created a force multiplier. Shared purpose aligns people without coordination costs.

Purpose is also a better motivator than money. Money, while necessary, motivates neither the best people, nor the best in people. Purpose does.

Actionable exercise: Have the people you work with write down the purpose of your work, then compare answers. Then ask, are any of these purposes something that would create a multiplier effect? Engage hearts and minds?

From isolated organizations to communities. The social era will reward those organizations that understand they can create more value with communities than they can on their own. Communities of proximity, where participants share a geographic location (Craigslist is an example but co-working locations are another) will allow people to organize work differently. Communities of passion who share a common interest (photography, or food, or books) can inform new product lines. Communities of purpose will willingly share a common task to build something (like Wikipedia) that will carry your brand and its offer to another level. Communities of practice, where they share a common career or field of business, will extend your offer because it extends their expertise (like McAfee mavens). Communities of providence that allow people to discover connections with others (as in Facebook) and thus enable the sharing of information, products and ideas.

Actionable exercise: Imagine that if you asked, you could get communities to co-create with you. What could you do together? What would be one way to try it out?

From centralized to distributed. While management often espouses the notion that good ideas can come from everywhere, in practice there are “thinkers” who create strategies and designated “doers” who execute those strategies. But that only leaves an air sandwich in the organization, where debates, tradeoffs, and necessary discussions are skipped. This air sandwich is the source of all strategic failure. Instead of centralized decisions, we need distributed input and distributed decisions.

Actionable exercise: Rather than making command and control a “bad” thing, discuss what areas needs which controls. Then examine how more, if not most, areas and decisions can distributed (and thus made radically more flexible). For the purpose of the exercise, say that you want 50% or 70% all decisions to be free of permission-seeking and check-ins. What would it take to get there?

When we emphasize purpose, engage communities, and distribute decision-making, we begin to stop talking about being fast, fluid, and flexible, and actually begin to make our organizations become fast, fluid, and flexible. This can change how we organize every single part of these organizations — from what we make, to how we product and distribute, to how we market and sell. Everything.

Disrupting How We Work
Many of you know of Clay Christensen’s iconic work the Innovators Dilemma. Small newcomers eat off bits of an established leader’s business through lower cost structure and a willingness to accept lower margins. This phenomenon has been seen in industry after industry, and usually focused on the cost of delivering goods and services. In other words, “Look how the steel mini-mills making rebar disrupt the established integrated steel mills making sheet steel.” At each point in the disruption, it makes economic sense for the big company to surrender that bit of the market to the disruptor, and so big companies logically put themselves out of business.

I think there is an analogous process going on with the organizational structure of businesses themselves; that aside from market-specific competition from below, there is also competition from disruptive organizations that are finding new ways to get work done. This change is just as threatening to established businesses as the process competitors Christensen identified, and just as difficult to respond to.

Where once you could reexamine the organization’s model (the how) every few years to support the rest of the business (the what), reinventing the how becomes its own muscle to develop.

How does this lead to disruption? To answer this question, let’s look at Singularity University, which I mentioned earlier in this series. You might recall that they deliver an education curriculum of 300 hours with seven full-time staff. Their organizational model lets them then fluidly reinvent what they create next, thus baking innovation in with their disruptive design. In particular some 80% of their business resources are fluid. Their purpose doesn’t change, but their “what” does. Their business model allows them to persistently review “what’s the next big thing” and adjust. Using Christensen’s metaphor, educational institutions are the sheet steel with its ever-increasing tuitions to support their tenured staff, while Singular University is the rebar. But their flexible design gives them the chance to keep being the “rebar.”

What Happens Now
Rather than try to power through with size, we’ll have to find power through shared purpose.

Rather than hiring and directing inside the walls of an organization, we’ll tear down those walls altogether and allow everyone to own a part of the big picture.

Rather than taking long stretches of time to perfect something, we’ll build fast, fluid and flexible organizations.

What we create in the end will be a different type of organization, one that embodies a culture of innovation.

Since I began writing this series, many of you have written publicly and privately asking, doesn’t this just mean the “800-pound gorilla” dies? Entrepreneurs and the startup ecosystem who embody fast / fluid / flexible attributes certainly believe that the established players are fated to die. Many think of these big organizations as the dinosaurs of our time. But one can look at the history of dinosaurs and see that dinosaurs didn’t really die. Paleontologists have suggested that dinosaurs are all around us today actually, as birds.

Applied to today’s business giants, the analogy probably holds. The “species” that adapt to the changes in the environment faster will do better. That is for sure. What is less clear is what they will become as they adapt. Perhaps the new model for a successful business should be “Nimble.” Or “Flux.” Or “Humanized.” Or “Networked.” Frankly, I find the search for naming less-than-fruitful. We have plenty of names already; will another name really help you act?

Over time, there will be a lot more dots filling out this picture. But the fundamental principles of the social era are already clear enough to form a new set of organizing principles for business. The world has changed; how we create value has changed. Organizationally we have not. It’s time to pay attention to these emerging business models now, to benefit our organizations, our economies, and ourselves.

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