Managing Risk through Ethical PracticeSocial Worker Resource
July 11, 2013 — 1,637 views
The rising number of malpractice claims along with the increasing severity of these claims is quite alarming. Insurance companies claim that malpractice in business has risen by about one fifth of what it was in the year 2011. This increase in malpractice includes both the frequency of events that are against corporate law and the number of reports of the same.
Effect of Malpractices
The increase in numbers has brought attention to various ethical pressures in a business. Apart from the ethical pressures it is equally important to understand the consequences and know the intricacies in managing risk. Malpractice in business usually takes the form of corporate fraud or tax evasion.
Corporate fraud is quite common. A fraudulent person in business must simply have an executive or managerial role. If this is not possible, then he simply has to be in touch with someone who is in that position. If you are working for a banking firm, then it is likely that you handle various mutual funds and a lot of foreign exchange.
Both these combined provide the perfect platform for insider trading. Gaining information prior to global news feeds and dealing in company shares are a few ways of cheating your way through business. Tax evasion is another common way in which certain firms cheat.
Tax evasion is easily done through ghost companies set up in various parts of the world. Additionally, NGOs and NPOs owned corporately are sometimes means to hide income in the form of donation. This exempts the firms from paying income tax. Black money is converted to white easily through such organizations.
How to Deal With it?
The main issue lies in solving corporate fraud. Making your employees aware of malpractice risk is an important way to start their orientation. If people know that you are weary of fraud and other misconduct within the firm, they may choose to target a more laid back company.
Increasing the severity of punishment is a good way to prevent people from indulging in corporate fraud. Today, corporate jails only stain a man’s reputation by keeping him locked up in a comfortable cell. While the deed is not as major as murder, cheating people out of money can have equally devastating outcomes.
The benefits of ethical practice seem minimal. You receive no monetary gain of any sort. Instead, you only lose out on money that you could have made if you had taken the risk of cheating. It is important to warn people of the consequences they may face if they get caught. Moral values and transparency need to be practised, gaining the goodwill of the people and their consumers.
All in all, it is important to keep in mind that corporate fraud is a high risk high returns scenario. Corporate lawyers, the federal government, and the police are becoming increasingly adept at catching people indulging in such practices. A long sentence even in a good jail is not worth a potential gain through unethical means.