SUMMARY
Unlike mature corporations, startups rarely have the luxury of dedicated compliance teams or even formal audit committees
Implementing a well-designed whistleblowing framework can be an effective tool for proactively identifying and remedying red flags in a timely manner
A robust whistleblower mechanism, coupled with a strong ethical tone from leadership, significantly reduces the likelihood of fraud
India’s startup ecosystem is thriving, with private capital playing an important role in fueling growth, innovation and scale.
The increase in investments across all stages, i.e. seed, venture and growth, has positioned India among the most dynamic markets globally.
However, this relatively easy access to capital brings its own set of unique governance challenges. Early stage companies backed by private equity (PE) often operate in high-growth, high-pressure environments where the absence of strong internal controls can lead to ethical lapses and financial misconduct.
Unlike mature corporations, startups rarely have the luxury of dedicated compliance teams or even formal audit committees. Their governance structures are lean, and decision-making is concentrated among founders and a coterie of senior leaders.
This concentration of power, combined with aggressive growth targets, can lead to blind spots. Common issues include inflated revenue reporting to attract additional funding, diversion of funds for personal use, vendor-employee collusion, conducting business with...
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