Managing fraud bribery and corruption risks in the hospitality industry
ey-managing-fraud-bribery-and-corruption-risks-hospitality-industry
ey-managing-fraud-bribery-and-corruption-risks-hospitality-industry
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Is your bus<strong>in</strong>ess geared to address key <strong>risks</strong> <strong>in</strong><br />
<strong>the</strong>se 3 phases<br />
Investment phase<br />
1<br />
Fraud scenario<br />
• Misrepresentation <strong>in</strong> <strong>the</strong> feasibility study report<br />
• Award<strong>in</strong>g franchise contract to a company with corrupt history<br />
• Rely<strong>in</strong>g on unrealistic budget <strong>and</strong> f<strong>in</strong>ancial projections prepared<br />
with a <strong>fraud</strong>ulent <strong>in</strong>tent, to attract <strong>and</strong> siphon off <strong>in</strong>vestment<br />
• Project consultant empaneled through employee collusion<br />
Questions to ask<br />
• Did favoritism result <strong>in</strong> select<strong>in</strong>g <strong>the</strong> third party advisor <strong>and</strong><br />
project consultant? Was a due diligence performed?<br />
• How secure is <strong>the</strong> br<strong>and</strong> <strong>in</strong> <strong>the</strong> h<strong>and</strong>s of <strong>the</strong> bus<strong>in</strong>ess partner?<br />
• Is <strong>the</strong> site selected for <strong>in</strong>vestment free of legal tangles? Are<br />
<strong>the</strong>re any political <strong>in</strong>terests <strong>in</strong>volved?<br />
• Given <strong>the</strong> complexities of <strong>the</strong> Indian environment, what<br />
is <strong>the</strong> company supposed to do where gift giv<strong>in</strong>g, even to<br />
government officials, is culturally acceptable <strong>and</strong> expected?<br />
Construction phase<br />
2<br />
Fraud scenario<br />
• Pilferage/siphon<strong>in</strong>g of construction material<br />
• Inclusion of ghost employees <strong>in</strong> payroll process<strong>in</strong>g documents<br />
• Bills of quantities be<strong>in</strong>g certified, without proper measurement of<br />
work<br />
Questions to ask<br />
• Is <strong>the</strong> project cost under-reported to match <strong>the</strong> budget?<br />
• Did <strong>the</strong> consultants fake <strong>the</strong>ir credentials to w<strong>in</strong> tenders? Is<br />
<strong>the</strong>re potential for kickbacks?<br />
• Is <strong>the</strong> construction material be<strong>in</strong>g diverted to a compet<strong>in</strong>g<br />
hotel? Is <strong>the</strong>re a mechanism <strong>in</strong> place to prevent <strong>and</strong> detect<br />
quality issues?<br />
• In a race to complete construction, is <strong>the</strong> project team<br />
violat<strong>in</strong>g local laws?<br />
6 | <strong>Manag<strong>in</strong>g</strong> <strong>fraud</strong>, <strong>bribery</strong> <strong>and</strong> <strong>corruption</strong> <strong>risks</strong> <strong>in</strong> <strong>the</strong> <strong>hospitality</strong> <strong>in</strong>dustry