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| ? How can you ensure Ethical Financial Management |
When the focus is on wealth maximization for self instead of shareholders or society, unethical behaviours creep in and the rot sets into financial management practices. In reality, companies that follow ethical financial management are more sustainable since they earn the trust of customers, shareholders, employees, bankers and more importantly regulators.
Unethical financial practices might appear to be profitable initially but have the potential to bring down even very large organization, as recent instances have shown. While there are many ways to ensure ethics in financial management, we could establish 5 best practices to help in building credibility with the stakeholders.
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- Companies should have a written code of ethics in financial dealings which protects all stakeholders like shareholders, bankers, regulators, employees and society too. This policy should be a guide for all the members in the finance department and address areas of integrity of people, integrity of information provided, corporate governance requirements, areas of conflicts of interest, etc. This policy should not be just for the sake of it, but should be well implemented with proper checks and balances to reveal violations of the ethics code.
- The culture of openness and transparency in dealings should be driven from the top and the CFO should lead by example. When clear distinction is made in personal interest and professional interest and the actions of the CFO are all done in good faith and balanced judgement taking all stakeholders into consideration, the culture is driven across the entire finance department.
- Companies should make compliance to laws in letter and spirit a habit across the organization which include all industry related laws, labour laws, tax laws etc. Timely compliance is a sure shot winner in driving credibility of the organization long term, and also helps the finance department confidently face any regulator. Having a compliance audit done at least once a year helps in driving this habit into the finance department.
- There should be well drafted internal financial controls framework for all the critical business operations. A risk-based approach would bring out the critical areas that need good internal financial controls.
- The company should have quality of deliverables as non-negotiable for everyone in the company whether it is the business product or service, or the financial information that is recorded and reported by the finance department. The finance department should provide information that is accurate, understandable, objective, and relevant for decision making. The positive and negative information should both be provided wherever needed, for giving an accurate picture to the stakeholders.
Following the above best practices would invariably drive ethical business practices too that would help a company constantly endeavor to deliver value to its stakeholders.
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The Author: Aparna Surabhi
About:
Currently working as CFO and CHRO in Caliber Technologies Private Limited. Actively heading the CSR wing of Caliber Technologies Private Limited working in the area of education, health and sustainable environment.
Practicing Chartered Accountant from 1991 to 2019 in S.Aparna & Co. Chartered Accountants. Have 28 years of experience in handling the audit function. Was the first Lady Chairman of the Hyderabad Branch of ICAI in the year 2006-07 Devises and conducts Quizzes as a hobby Speaker on subjects of professional interest in various forums Written articles on professional topics that were published in regional and national level.
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