Digitalization is one of the global megatrends, and with the ever-growing adoption of digital
technologies and digital applications, it has become almost omnipresent. An increasing number of corporates across sectors are in the midst of digital transformation, which is a crucial component of their business strategies. As per reports, by 2025, the global volume of data will soar to 163 zettabytes and by 2020, 30 billion devices will be connected. Nearly 80 per cent of corporates are reported to have a digital initiative under way while close to 70 per cent believe that they need to invest in a digital strategy to remain competitive.
As digitalization disrupts society and business models, it poses both a challenge and an opportunity for compliance officers. More than ever, this transformation makes a convincing argument for laying stress on the importance of business ethics in the functioning of any company. A corporate must essentially develop a character for the company rather than only stress on more processes since it is the character with which the company gets identified in the long run.
Why? Consider the amount of data, growing at an exponential pace, available for corporates to harness. Combine this with the emergence of powerful technologies such as machine learning and artificial intelligence. New skills have also materialized, such as data mining, data visualization and risk analytics.
It is in such a scenario that new risk management techniques and strategies need to take shape. Corporates, with a strong ethical character, will effectively combine the need for reviewing processes, making tools intelligent and automating risk identification with role models for good corporate governance among senior management.
For every corporate, the journey for achieving good corporate governance commences at the very top. As culture starts at the top, it is very important to have the right members as role models and captains of the businesses. Healthy debates, quality of discussions, allowing dissent in a healthy manner within the management teams are all essential and vital. ‘Walk the Talk’ by the management sets the tone for values within the organization, not just maximizing efficiency, monitoring business processes and automating compliance controls.
It is only values that can lead to sustainable business. Leadership guru Peter Drucker said, ‘Culture Eats Strategy for Lunch’. Hence, a lack of speak up culture would not be able to sustain an organization. ‘Speak up culture’ should be encouraged and all employees should be encouraged in ‘speaking the truth; being honest and trying to build a value-based organization’ as this is what creates a good ecosystem for good corporate governance. Such an organization is bound to succeed over the long term in the digital age, where the constant focus on quality, flexibility and efficiency forces constant change upon employees!
Building a robust moral fabric is important as only that would lead to sustainable and profitable business.
The Indian industry has taken to digitalization, with some sectors being able to identify and exploit the benefits earlier than others. From an Indian perspective though, there still exists a trust deficit between the government, industry and society. The basic reason behind the widening gap is the question of ethics and how each pillar could try to ensure ethical behavior, specially at a time when digitalization also brings in transparency and speed!
As the Indian Industry has so far seen six committees formed to educate and direct industry on what constitutes good ‘Corporate Governance’, its importance cannot be better underlined.
Due to some deviation by corporates from their fiduciary duties, the government promulgates new regulations, which demand increased disclosure requirements by corporates while on the other hand industry looks up to these committees to guide the industry captains on good governance. It is an oxymoron that needs quick addressal.
Deliberations within organizations that have been found wanting in compliance have revolved around the question of what was more essential and important: Having more processes or developing a character for the company?
Values can never change with technology or newer business models. To sum up, building up of moral fabric is very important as only that would lead to sustainable and profitable business.
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Contributed by:
Neville K Gandhi
Member, CII Taskforce on Integrity and Transparency in Governance and
Vice-President Compliance, Siemens Ltd.