Outsourcing Risks - Role of People, Process and Technology

Abstract :

Outsourcing non-core business activities to third parties is a world wide trend these days. However while doing so, organizations often incur risks that may put the entire business operations at stake either immediately or a time later.

Thus special care is needed while stepping into any kind of outsourcing arrangement with a service provider.

By Nikhil Parulkar

Full article is as below:

Babu asked bribe for Delhi posting: Bedi

AHMEDABAD: After Ratan Tata revealed how he had refused to pay bribe when he wanted to start an airline service, it was Kiran Bedi's turn to expose a similar case. She recounted a bribe demand by a government official in return for a desirable post in Delhi police at the IIM-A campus on Sunday.

Attending the B-school's annual event Confluence 2010, Bedi disclosed that a government official holding an important position at that time asked for Rs 6 lakh if she wanted a posting in Delhi as her tenure in Mizoram had ended in 1992.

"I refused to pay the amount and asked them to print the money themselves and take it. Because of this, they kept me waiting for nine months and did not assign me any duty after which they finally posted me in Tihar Jail," she said.

Bedi shared these experiences related to corruption while speaking at the valedictory function of IIM-A's business school summit. However, she refrained from sharing the name or identity of the official who demanded the bribe. She said the biggest corruption scams in the country are handiworks of corporates.

"Corporates are corrupting the government" she said, adding, "It is my sincere request that the institute undertakes research to find out why these young talented and educated officers are getting into corruption." According to her, another research must be conducted to find out why these talented bureaucrats corrode and why don't they speak up about corruption before their retirement.

Referring to other issues, which need to be researched she said, "So many engineers are getting into administrative services. Is not it waste of all the skills they learnt as engineers? We need to find out who are better managers; people from arts background or people from the science background."

Source: The Times of India; November 29, 2010

Conducting a forensic investigation post the incident reporting

Abstract:

Fraud is a prevalent and a pervasive incident, and the investigation needs to be thorough and fair. Good investigators are those who seek facts with a substantial degree of independence. It is also critical that good investigators imbibe values of thoroughness and objectivity while conducting an investigation; such investigators are likely to have more credibility and their findings are more likely to be accepted as fair & unbiased.

Full Article Link is as below:

http://searchsecurity.techtarget.in/tip/Investigate-fraud-with-these-best-practices

ON GUARD:- ‘Wipro fraud probe hints at involvement of multiple officials’

PROBE COMMITTEE TO SUBMIT REPORT BY MONTH-END

EARLY investigations into the embezzlement reported at Wipro, earlier this year, hint at the involvement of multiple officials and units within the company’s financial department, people familiar with the ongoing probe told ET. Last week, Wipro said it will file its annual report with the US Securities and Exchange Commission for the yearended March 2010 more than a month after the scheduled September 30 deadline, as it awaits the investigations to be completed.

Audit firm Ernst & Young, apart from an internal probe committee led by Narayanan Vaghul, former chairman of ICICI and an independent director with the country’s third-biggest software exporter will submit their reports to the company’s board later this month, according to persons with knowledge of the developments.

“The embezzlement has been happening over three years. It cannot be carried out in isolation. The objective of investigations is to identify the process improvements and even fix accountability,” one of the persons told ET, requesting anonymity. He added that it was still too early to draw conclusions, since the investigation is expected to be completed by October-end only.

The fraud came to light in December last year after a banker to the firm alerted Wipro about an overdraft. An employee working with Wipro’s ‘controllership’ division, within the finance department, had embezzled about $4 million by exploiting the exclusivity of access to the company’s banking accounts. Wipro declined to offer any comments, as the company is in a silent period ahead of its second quarter results later this month. An Ernst & Young spokeswoman did not respond to a query sent by ET.

As reported by ET in February this year, a Wipro staff embezzled crores of rupees over the past three years, sending the country’s thirdlargest software exporter scrambling to tighten internal controls in the finance division, where the incident took place. The employee had been working with the company for the past three years in the ‘controllership’ division, within the finance department. This cell is responsible for keeping the company’s financial books and also has powers to authorise payments whenever needed. The employee siphoned off the company’s money to his personal savings accounts in multiple transactions, worth anywhere between 1 lakh and 1.2 crore, and used the money to acquire jewellery, apart from making other investments, including buying land.

Apart from investigating how the processes were tweaked to carry out the embezzlement, E&Y, along with the internal auditors, is also examining if there were more departments and people involved in the incident. For instance, while the controller ship unit, where the embezzlement happened, is responsible for authorising payments, such requests are processed by Wipro’s payments-processing department called Wividus.

However, Suresh C Senapaty, CFO of Wipro, had denied involvement of more than one Wipro staffer in this embezzlement. “Our investigations have revealed that only this employee was involved, and nobody else in the team had any clue,” Mr Senapaty had said. Wipro has since disbanded the controllership unit and even introduced several changes.

“Already, no cheque payments are being made by Wipro to any vendor, especially after the embezzlement was reported. There could be more changes after the recommendations are accepted,” another person familiar with the developments told ET.
Among other changes being examined is the rotation of staff handling sensitive functions within the finance department.
In a statement issued last week, Wipro said it has already recovered all of the embezzled money.
“Wipro, together with its audit committee, conducted an investigation to determine, among other things, the materiality of the amounts embezzled and to assess the design and implementation of internal control processes. Based on its review of the facts discovered during its investigation, Wipro believes that the amounts embezzled were not material,” the company said in a statement issued on October 2.
Wipro brought Ernst & Young to minutely verify the audited accounts that were earlier certified by the company’s statutory auditor BSR — an audit arm of KPMG. Both E&Y and KPMG are part of the Big Four accounting firms that typically audit large companies such as Wipro.
Among other measures being considered, employees working in sensitive functions within the finance department may be rotated more frequently. Currently, employees in such functions spend around three years before a transfer. Going forward, Wipro also plans to make it mandatory for employees working in the finance division and elsewhere to sign an undertaking about sharing of passwords and any unauthorised transactions.
CHECKS & BALANCES
Wipro said last week, it has already recovered all of the embezzled money
As a precautionary measure, employees working in sensitive functions within finance dept may be rotated more frequently
Wipro also plans to make it mandatory for staff working in finance dept to sign an undertaking about sharing of passwords and any unauthorised transactions.

Source: The Economic Times; dt. 05.10.10

'Another US recession likely'

NEW YORK: University professor Nouriel Roubini said there's a high probability of another recession in the US, with Japan's outlook anemic, underscoring risks to the global recovery.

China, the world's fastest-growing major economy, may face greater headwinds should there be weak growth in the US and Europe, Roubini said in Kuala Lumpur on Monday, where he is attending a conference. "Second-quarter GDP figures for the US are likely to be revised lower after June real-estate numbers," he added.

Austerity measures to cut debt in advanced nations are hurting consumer and business confidence and households in some of the largest economies are holding back spending. "Emerging economies may have to get used to relying on domestic demand in a period of subdued growth for developed countries," Roubini said. "We know the H2 of the year is going to be worse than the first half of the year because of the tailwinds to growth from the fiscal stimulus turning into austerity," he said.

Source: - The Times of India

Vatican Bank head in money laundering probe

ROME: The head of the Vatican bank is under investigation for suspected money laundering and police have frozen 23 million euros ($30.21 million) of its funds, Italian judicial sources said on Tuesday. Neither Ettore Gotti Tedeschi, who has been at the helm of the bank for a year, nor the Vatican spokesman would comment immediately on the case, which involves alleged violations of European Union money laundering regulations.

The sources said Gotti Tedeschi and another executive of the Institute for Religious Works (IOR), as the bank is officially known, had been put under investigation by Rome magistrates Nello Rossi and Stefano Fava. The sources said Italy's financial police had preventively frozen 23 million euros of the IOR's funds in an account in an Italian bank in Rome.

Two recent transfers from an IOR account in the Italian bank were deemed suspicious by financial police and blocked. One was a transfer of 20 million euros to a German branch of a U.S. bank and another of 3 million euros to an Italian bank. Gotti Tedeschi, a devout Catholic who has taught financial ethics at the Catholic University of Milan, is a close adviser to Treasury Minister Giulio Tremonti. He is currently also head of an Italian unit of the Spanish Banco Santander, according to its website, and serves on the board of several major Italian banks.

The IOR principally manages funds for the Vatican and religious institutions around the world, such as charity organisations and religious ordes of priests and nuns. It was involved in a worldwide scandal in 1982 when it was embroiled in the fraudulent bankruptcy of Banco Ambrosiano, then Italy's largest private bank. The IOR held a small stake in Ambrosiano, whose president Roberto Calvi was found hanged under London's Blackfriars Bridge the same year. Several investigations failed to determine whether Calvi, known as God's Banker, had been killed or committed suicide. At the time the IOR was headed by American Archbishop Paul Marcinkus, who died in Arizona in 2006. The Vatican denied any responsibility for the collapse of Banco Ambrosiano but made what it called a "goodwill payment" of $250 million to Ambrosiano creditors.

Source: The Times of India, Sept 21,2010

Violence against whistleblowers in India prompts calls for laws to protect them

IN NAYAKANPETTAI, INDIA When police found Vaidyalingam Balasubramanyam's body dumped beside a road in this southern Indian village recently, his family said that telling the truth had cost him his life. The hand-loom weaver turned whistleblower had been fighting corruption in the local weavers' cooperative for the past three years.


"We suspect some people kidnapped him, forced open his mouth to pour in poison or pesticide and threw him out of a moving vehicle," said his son Shanmugan Vel, 25 , as he sat on the floor next to his father's framed, garlanded photograph at his home in the sari-weaving district of Kancheepuram, in Tamil Nadu state. "My father spent all his time investigating the office files for corrupt practices. He sent dozens of complaints to the top officials and leaders."


His father had been warned of the risks he was running, Vel said, but had responded that the documents "contained the explosive truth that will clean up the system."
Eleven people have been killed or found dead in mysterious circumstances in India this year after exposing corruption in schools and public utilities, illegal mining and unauthorized water and electricity hookups, according to activist groups.


Hundreds of others have been attacked, threatened or harassed for similar crusades. In July, about 500 whistleblowers marched in New Delhi to protest the deaths and demand effective anti-corruption and whistleblower-protection legislation in a country where graft is more the norm than the exception.


The demand for such a law began six years ago after a national outcry over the killing of a 30-year-old engineer who had exposed a corruption scandal in highway construction.


Last month, the Indian government finally introduced landmark draft legislation - titled the Public Interest Disclosure and Protection to Persons Making the Disclosures Bill - that proposes a system for dealing with corruption allegations and a three-year jail term for officials who disclose whistleblowers' identities.
"It has been felt that the persons who report the corruption or willful misuse of power or willful misuse of discretion, which causes demonstrable loss to the government . . . need statutory protection," said Prithviraj Chavan, minister of state for personnel, public grievances and pensions, while introducing the bill.
Despite recent rapid economic growth, the expansion of the middle class and the spread of education and mass media, India was ranked 84th out of 180 countries last year in the annual corruption perception survey conducted by the global watchdog Transparency International. Of the various Indian departments analyzed, the police force emerged as the biggest offenders.


Since 2005, anti-corruption crusaders have used a law mandating the right to information to access official files and expose malfeasance. Balasubramanyam had collected hundreds of official documents indicating that a single family held a monopoly over the cooperative management, according to Vel, who showed a reporter photocopies of the documents. The files also showed evidence of embezzlement.


"Due to heavy rainfall last year, the government sent compensation money to hand-loom weavers. But I did not get any of it, even though the records in the cooperative showed that all the weavers had been paid," said Sukha Lingam, 40, a weaver in Nayakanpettai. "The managers ate up all the money meant for the poor."
Balasubramanyan always carried with him a yellow cloth bag containing files he had accessed. The bag is now missing. The police registered a case of "suspicious death" after his killing and sent his body for examination.


Analysts say public intolerance of corruption has grown in recent years, spurring the push for stronger laws to combat it - but also inviting violent reprisals.
"For many decades, Indians kept saying, 'What can we do?' But now corruption has reached a level that it is difficult to look the other way," said Sumaira Abdulaali, a member of the Movement Against Intimidation, Threat and Revenge against Activists, an independent coalition. "When illegal activities take place on such a major scale, then we can be certain that the entire system of politicians, officials, police and criminals are mixed up in it."


Many activists say, however, that the new whistleblower bill is still inadequate. It covers only the government bureaucracy and not the military or the corporate sector. It is silent on those exposing corrupt politicians. The bill empowers a body called the Central Vigilance Commission to investigate cases, but the government is not bound to follow its recommendations. It also says anonymous complaints will not be accepted.


"It is just a showpiece legislation," said Arvind Kejriwal, head of Parivartan, a New Delhi-based group that campaigns for transparency. "The entire emphasis of the bill is in keeping the name of the whistleblower a secret. That is the last concern of the people who blow the whistle. What they want is swift, guaranteed investigation and action on their complaint so that they are not vulnerable to physical threats and professional harassment."


The ministry has invited activists to comment on the draft legislation by the end of September.


Last month, the Delhi High Court ordered the government to pay compensation to Mahendra Kumar Tyagi, 65, who was harassed at work for complaining against his bosses' corrupt activities in the state-owned oil company. For 10 years, Tyagi said, nobody spoke to him at the office and he received no promotion.


"I was made an outcast and a prisoner in my office cubicle. It was like slow poisoning," Tyagi recalled.


Last month's court order hailed him as "courageous."
"I have been vindicated," he said. "But at what cost? I ruined my life, my health and my peace of mind. Today I tell my son, 'Don't be honest. You will get nothing but trouble. In India, the honest are punished, the corrupt are rewarded.' "

Source: The Washington Post, By Rama Lakshmi, Dt. September 11, 2010