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CHAIRMAN'S BLOG
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Vigil Mechanism – The New Perspective of RAS

Recently, our Group Chairman addressed our Risk and Advisory Services(RAS) Team on repositioning RAS to deliver Vigil Mechanism to our clients. Sri Shailesh Haribhakti is no doubt, a visionary leader in the RAS world and has had an impeccable record of business foresight in anticipating the shape of things to come.

As you may know, Section 177 of the New Companies Act 2013 requires every listed company to establish a Vigil Mechanism and adopt a Code of Conduct which lays down the principles and standards that govern the actions of the directors and employees. Any actual or potential violation of the Code is a matter of serious concern and should be brought to the attention of the concerned authorities. The act also provides to protect the person who can use such mechanisms for reporting genuine concerns.

In the US and the UK Sarbanes Oxley Act, 2006 requires every public company to providea whistle blowing mechanism to all its employees. The Securities and Exchange Commission (SEC) offers complainants up to 30 per cent of the penalties levied, in excess of a million dollars, if a complaint is proven genuine. Companies are mandated by various regulations to have mechanisms to receive such complaints.

In India, Clause 49 of the Listing Agreement between listed companies and the Stock Exchanges, provides for a mandatory requirement for all listed companies to establish a mechanism called the ‘Whistleblower Policy’ for directors and employees to report concerns of unethical behavior, actual or suspected, fraud or violation of the Company’s code of conduct or ethics policy. The Business Responsibility Reporting (BRR) mandated by SEBI for certain companies has references to having vigil and reporting mechanisms.
As professionals, we need to adapt to the changing environment and requirements / challenges, faced by the corporate world. Only then can we be relevant and be able to add value to our clients. The Risk Advisory Services has evolved responding to such changes that has taken place globally and in India.

In the 1990s before the IT revolution, Internal Audit was transactional in nature and was carried out on sample check basis. Audit was expected to give reasonable assurance. The Companies Act also required auditors to report whether the Internal Control and Checks are commensurate with the size of the Company.

The IT Revolution put in India on the Global map, as a key source and destination of skilled pool of talents providing IT processes and solutions. Companies invested majorly in IT systems and ERPs. It also revolutionized the Audit Methodology and process. It was now possible to check the entire population, rather than to sample check, for existing or potential internal control failures. Audit was now expected to provide absolute assurance and not just reasonable assurance.

The liberization and gobalisation initiatives taken by Indian Government saw Corporate India expand its operations globally. With all round growth in volumes it became necessary to do Risk Assessment and Control Evaluation to prioritise areas that need to be covered to provide maximum value from internal audit processes. Our Internal Audit Services were expanded to provide a complete range of Risk Advisory Services and conduct risk based internal audit.

The Clause 49 of Listing Agreement introduced Corporate Governance norms which were required to be met by the listed Company. This required companies to have a set of system, processes and principles to ensure that the Company is governed in the best interest of all Stakeholders. Commitment to Values, ethical conduct of business, transparency and accountability in business transactions, Statutory and legal Compliances, adequate disclosures became the need and requirements of the corporate. Internationally, similar needs and requirements were set out by the Sarbanes Oxley Act and setting up of Public Company Accounting Oversight Board.

Our Risk Advisory Services positioned itself to provide full range of services covering Governance, Risk and Compliance. We reviewed and developed Internal Control Frameworks, Risk Management Frameworks, Legal and Statutory Compliance Frameworks, Standard Operating Procedures, IT Security Policies and Control, Enterprise Risk Management. We partnered with the best IT Solutions providers that would provide the required platforms to implement these Frameworks.

At DHC, we have adapted to the changing external environment, increasing complexities of running businesses, needs of clients and the growing rigor of meeting regulatory requirements. Our Riskand Advisory Services developed capabilities to provide IT enabled GRPC platform to address Governance, Performance, Risk and Control requirements of our clients organizations. DHC has tied up with Thomson Reuters for the IT enabled GRPC platform, and with Legasis for software based Compliance Management services. Our RAS teams have already met several clients who are interested in these offerings, as they provide tremendous value for money.

With the requirement for Companies to set Vigil Mechanisms, DHC is taking the lead in re-incarnating the Risk and Advisory Services to provide the Vigil Mechanism to our client organizations. A Vigil Mechanism is a proactive and preventive process to anticipate risks and strengthen control mechanisms on a proactively continuous basis. It provides assurance to all stakeholders that the stated Business goals and objectives are on track, and that existing processes and controls are resilient and adequate to address business uncertainties and risks, well before they occur.

Big Data Analytics, connect to business needs, insights to its internal and external challenges understandings of these internal – external interfaces and capability to design and provide required Internal Controls and Risk Management Frameworks, Effective Internal Audit System, Fraud Risk Management, effective Whistle Blower Policy and IS Security Policy, Control and Procedures helpsto deliver Vigil Mechanism to the client’s organization.
At DHC let us all gear ourselves to see RAS in its new avatar – Creating and Delivering Vigil Mechanism to our clients.

- Dilip B. Desai

Monday, September 8, 2014 . 0 comments
 
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