LEADERSHIP E CULTURE

Strategic Business Leader

Tutor : Subhan Mirchawala &

Owais Mirchawala
 Leader Strategy Leader
Section 1: Leadership Role Motivates teams and Shapes strategy and manages
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delivers performance uncertainty

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Leadership & Strategic Leadership &

Decision- Operational, routine Complex,

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future-oriented,
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Leadership is the ability to influence, motivate, and enable others to

- =
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Making uncertain
contribute toward the effectiveness and success of an organization or In SBL course whenever we will be referring word leader we will be
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O
- - - - - -

group. referring to strategic leader.

It involves: Role of Effective Leadership in Strategy and Change
• Setting a direction for the organization.
>
- Effective leaders are essential for both the creation and execution of
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Inspiring and motivating employees.

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• - strategy as well as for managing change across the organization.

• Making key decisions that affect the long-term performance.
•
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Managing relationships and leading people through change ⑥

Role in Strategy Formulation:
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and uncertainty.
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-•Vision setting: Communicating a clear and compelling purpose.

Strategic Leadership • Environmental analysis: Interpreting trends and opportunities.
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• Objective alignment: Ensuring that goals match values and
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Strategic leadership focuses specifically on influencing others to
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capabilities.
voluntarily make decisions that enhance the long-term success of the
F

Role in Strategy Implementation:

- &
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organization while maintaining short-term stability. -

Key features of strategic leadership: • Translating strategy into action through policies, structures,
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and incentives.
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• Long-term vision
- • Leading through influence rather than command.
• Understanding the external environment
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• Overcoming resistance and mobilizing support across
• Managing complexity and ambiguity -
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departments.
• Balancing competing stakeholder interests
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• Leading strategic change

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Role in Change Management:
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Difference Between Leadership and Strategic Leadership • Creating urgency for change and reducing fear.
Building coalitions and empowering middle managers.
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•
Aspect Leadership Strategic Leadership
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• Reinforcing new behaviors through leadership modeling and

Focus Day-to-day operations Long-term vision and strategic
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culture.
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and people direction

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management
Scope Team-level or Organization-wide and
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departmental external environment

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Time Short②
to medium-term Long-term sustainability and
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=
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Horizon positioning
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 G
Key Leadership Traits for Strategic Success ~Transformational Leadership
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Trait Explanation and Strategic Relevance Transformational leaders inspire and motivate followers to achieve
more than expected by appealing to higher ideals and moral values.
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Visionary Enables the leader to see opportunities before

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- Thinking others and align the organization toward a

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They focus on vision, change, and innovation. Key Features:

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long-term goal.
• Focus on long-term vision
Emotional Helps build trust, resolve conflict, and lead - -

~Intelligence - >

diverse teams during uncertainty.

- • Inspires followers through charisma and passion
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Encourages -
creativity, personal -
growth, and innovation
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•
Resilience Critical during organizational crises, change,
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-
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&
• Builds strong emotional connection
and long-term projects.
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• Aims to transform both the organization and the people

-Adaptability Allows quick responses to shifting market
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-- -

conditions and internal challenges. Entrepreneurship and Intrapreneurship in Strategic Innovation

-Decisiveness Essential for making timely and impactful
Entrepreneurship
decisions with limited information.
-Communication Ensures strategy and change efforts are clearly Entrepreneurship is the process of identifying unmet market needs and
A =>
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understood across levels. creating new products, services, or ventures to exploit these
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opportunities. Entrepreneurs often:

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Integrity Builds trust and ethical credibility—crucial for

~ stakeholder buy-in.
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• Operate outside of existing organizations.

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Transactional and Transformational leaders • Take on high levels of risk.

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• Disrupt industries and challenge established players.

=>
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~Transactional Leadership Intrapreneurship

Transactional leaders focus on clear structures, roles, rewards, and
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punishments. They guide followers by setting clear goals and using

>
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organization. It involves:
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Intrapreneurship refers to entrepreneurial behavior within an existing
performance-based incentives. Key Features:
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• Employees initiating innovative projects.

• Based on exchange: "Do this, and you'll get that"
• Focus on short-term goals
=>
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• ----
Creating new products, services, or processes.
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• Using company resources while driving internal renewal.

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• Emphasizes discipline, routine, and efficiency

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Maintains the status quo Strategic Relevance:

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•
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• Rewards good performance; penalizes poor performance

• Both foster innovation and agility.
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--
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• Entrepreneurs create new markets; intrapreneurs rejuvenate

existing firms.
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• Encourages a culture of innovation, essential for competitive

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advantage.
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 Governance and Leadership – Key Ethical and Professional values 9. Judgement: Effective leadership requires sound judgement
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expected in a Leader based on understanding the business, risks, and external

environment. Failure in this area, such as in the Lehman
Governance refers to the system of control and management by which &

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Brothers collapse, can have catastrophic outcomes.
organizations operate. Leaders play a critical role in ensuring effective
=>
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~10. Integrity: Integrity demands honesty and adherence to moral

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governance by acting ethically and professionally on behalf of

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principles. A professional must not be associated with
stakeholders. While shareholders are a key focus in commercial
misleading information or omissions. The integrity of the
entities, other stakeholders must also be considered.
organization mirrors the integrity of its people.
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1. Fairness: Leaders must ensure equality and justice in decision-
- ~11. Reputation: An entity’s reputation depends on the ethical
conduct of its people. It affects market value and stakeholder
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making. All stakeholder interests, including minority

trust. Scandals like Volkswagen’s emissions cheating highlight
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shareholders, should be respected equally.

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the cost of reputational damage.

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~
2. Openness (Transparency): Companies should provide accurate
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and timely information to stakeholders. Leaders must foster

- a
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Organization Culture
culture that supports transparency across all levels of the
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organization. Organisational culture refers to the shared values, beliefs, norms, and
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3. Innovation: Good governance is not just about compliance but

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~ - - >
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practices that shape how people behave within an organization. It is
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about creating value through new and improved practices.

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often described as "the way we do things around here."
Risk-taking should be balanced with effective risk management
and disclosure.
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• Culture is developed over time, often unconsciously.

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4. Scepticism: A questioning mindset is essential, especially for

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• It influences decision-making, communication, and attitude to
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~
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>
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non-executive directors (NEDs), who must critically assess

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risk.
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strategies and proposals to ensure sound governance. • It affects how employees interact with one another and with
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external stakeholders.
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~ Independence: Decisions should be objective and free from

5.
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- >
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conflicts of interest. Measures such as separate roles for CEO

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- If strategy is the engine, culture is the oil—it either enables smooth
and Chair, independent NEDs, and audit committees help
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- functioning or causes
-friction.
ensure independence.
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6. Probity and Honesty: Leaders must act with integrity and Different possible types in organization culture:
~
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- =>

truthfulness. Misleading stakeholders can lead to severe legal - Power culture – power is concentrated in the hands of the
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>
and reputational consequences, as seen in the Tesco mis-
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“boss”.
accounting case. - Role culture – a traditional structure in which jobs are
=>
L7. Responsibility: Boards must take ownership of their decisions
>
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arranged by function and seniority and each employee has a
and be responsive to all stakeholders—not just shareholders.
=>
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= - distinct role and job specification.

~8. Accountability: Those in power must be answerable for their -

- Task culture – emphasis is on getting the job done.

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actions. Mechanisms like AGMs enable stakeholders to hold the

- - - Person culture – the employee follows a personal ambition in
board accountable. Reporting must reflect both economic and -
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the context of the organisation and interacts with the

social responsibilities. - -
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organisation as little as possible

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Further culture is also impacted by following four variables: The paradigm is the set of assumptions and collective experience of
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the organisation. It will determine how the organisation reacts to

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- Power Distant behaviour of people = -
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events, and therefore shape the strategic decisions. The paradigm is

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- Individualism and Collectivism F = -

the result of all the other aspects of the cultural web.

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- Uncertainity avoidance
- Long term and Short term orientation
- Masculinity and Feminity values
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- Rituals and routines are the things that are done on a regular basis
~ = -

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and reflect the underlying beliefs of the organisation (e.g. long

The Cultural Web
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working hours, induction courses).

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A useful tool for analysing the culture of an organisation is the cultural

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- Stories that people tell about the organisation reflect what people
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web. This involves examining different aspects of the organisation and

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in the organisation admire or dislike. Typically these might relate to

considering what these say about the culture and its values.
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a former boss or other key employee, or to a big event in the life of

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the organisation. They often reflect a belief in the way things

should or should not be done.
①
- Symbols are objects, events, acts or people that may convey some
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z

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meaning above their functional purpose (e.g. company cars may
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>

symbolise status of managers).

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- Power structures relates to which person or group of people hold
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power. Power means the ability to persuade, induce or coerce

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others into doing certain things. Power may be held closely by

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= senior management or distributed in a more democratic way.

- Organisational structures reflect the power structure. If the
=> is structured around a ()traditional hierarchy, for
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organisation =

example, this suggests that power is held by the people at the top
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D
> -

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of the hierarchy; more informal, flatter structures may reflect a
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more democratic structure.
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- Control systems are the formal and informal ways that staff are
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monitored, including reward systems and performance metrics.

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They reflect what is considered important to the organisation.

 Impact of Leaders on Culture Culture reflects a belief in the way things should be done. If a culture
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has become entrenched, organisations may be reluctant to try to do

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Leaders are custodians of culture. Whether during normal operations - -

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things a different way in order to adopt new strategies:
or strategic change, leadership must:
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- Where the external environment changes dramatically, an

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=>
• Define the desired culture aligned with strategic objectives. - -
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organisation's response might be to continue with the existing
Assess the existing culture (Is it helping or hindering
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•
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- - -

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strategy, or perhaps only change this incrementally. This can lead
performance?). - - - -

to strategic drift (i.e. a situation in which the organisation's strategy

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• Take deliberate actions to bridge any cultural gaps. - - - >

- - is no longer appropriate to its business environment).

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Different Leadership actions can have different influences on >- New managers with new ideas may find that those ideas clash
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organization culture. with the organisation's culture. Different cultures can be a

particular---
problem in acquisitions and mergers if staff at the
Leadership Action
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Cultural Influence acquired organisation do not buy into the strategy and culture of
=>Strategic decisions Prioritization of innovation vs. compliance - -
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the acquirer.
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=> - -

Communication style Transparency vs. secrecy

- Reward systems
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Performance vs. loyalty emphasis Where business change is being introduced, it is often necessary to
>
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change the culture of the organisation before introducing the change.
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=>Hiring and promotion Reinforces traits the leader values

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Interaction of Organization Configuration and Cultures

Failure to manage culture can lead to Strategic failure, Low morale, Cultures and configurations go hand-in-hand, so to understand how
Talent retention issues and Ethical lapses
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culture affects strategy and purpose, we need to understand the

①
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configuration. For example:

*

Impact of Culture on Strategy =

The culture of an organisation, being the entrenched set of beliefs, may - A tall-narrow hierarchical structure will usually imply a role
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help or hinder
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appropriate strategies:
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culture and a machine bureaucracy with great emphasis on control,
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symbols, titles and strict power relations. This can work well in
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- "Cultural glue" refers to the benefits that culture can have in

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stable environments, where the paradigm will often be based

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motivating employees. If employees believe in the culture and that round efficiency and cost leadership. It is also needed in high-risk
O
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it is right for the organisation's strategy, employees will be

-

- -
environments where careful supervision of subordinates is needed.
motivated and not require too much management control.
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- In contrast, a wide-flat structure will more often imply a task
*

- "Captured by culture" means that the existing culture may culture and a professional bureaucracy, withE little emphasis on
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prevent the organisation from making bigger strategic changes symbols of hierarchy, more participative decision making, and
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when required. New strategic ideas may not be accepted as they

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fewer stultifying controls. Here, the paradigm is more likely to be

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conflict with the entrenched belief about how things should be

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based around customer service, responsiveness, differentiation
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done.
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and innovation.
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- The company may have started in an entrepreneurial/power
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culture with a charismatic leader who recruited like-minded

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-change
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Scope of change
employees. Formal controls could have been non-existent and the
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small
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6
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company was fun to work in. Later it could be listed and inevitably - A realignment means that the change can be effected within the
have to adopt much more of a role culture; controls will become
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current business model and without a significant change in culture.
tighter and public scrutiny will affect rituals, symbols and the
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The strategy is realigned with the external environment, which may
organisational paradigm. Neither the founder nor existing staff may
z
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have changed incrementally.

enjoy the new situation. - A transformajon means that a more extensive change is required
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to the business model and this will---

require a change in culture.
Impact of Culture on Purpose and Strategy
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Nature of change Time /Process

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>
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Organisational purpose is the fundamental reason the organization

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exists—beyond profit. Culture can either support or hinder the

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Nature of change refers to how quickly the change needs to be

achievement of this purpose.
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implemented:

How Culture Affects Strategy: - A big bang means the change needs to be implemented very
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quickly, possibly because the organisajon is facing corporate

Alignment: When culture aligns with strategy, execution
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• -
&
failure.
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becomes smoother. - An incremental approach means that the change can be introduced
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Resistance: When culture resists strategy (e.g., innovation in a

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• - - -
in a slower, piecemeal fashion, enabling the organisajon to develop
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rigid hierarchy), execution slows or fails. the skills and culture change required over jme.
*

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• Stakeholder Trust: Ethical, inclusive cultures build trust and

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-Nature
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brand reputation, which supports strategic objectives.

=

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Leadership and Strategic Change

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Strategic change refers to changes in the long-term direcjon of the

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small - Big
company. Most changes are incremental and based on exisjng
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strategies. However, somejmes more extensive change is necessary.

speeda
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slow => = -

Leadership is of vital importance in strategic change, as any change will

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meet resistance from within the organisajon, so leadership is required

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jast
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to drive the change and persuade those within the organisajon to

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⑤ =>
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- =
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accept it.
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The leadership required depends on the extent of the change. Balogun

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and Hope Hailey idenjfied four types of change based on two variables:
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The four types of change based on the two variables are:
- AdaptaZon is the most common type of change. It does not require > i
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development of a new paradigm and proceeds step by step.

- -
- -
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small
Change
- ReconstrucZon can also be undertaken within an exisjng paradigm
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but requires rapid and extensive acjon. It is omen forced in > small change
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gast
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response to a long-term decline in performance or a changing

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compejjve context.
- EvoluZon is an incremental process that leads to a new paradigm.
It may arise from careful analysis and planning or may be the result > Big
=> - - - -
- change
slow
of learning processes. Its transformajonal nature may not be +
-
- -

obvious while it is taking place.

- O
RevoluZon is a rapid and wide-ranging response to extreme
-Big change
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pressures for change. A long period of strategic drim may lead to a

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crisis that can only be dealt with in this way. Revolujon will be+
very
fast
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-

obvious and is likely to affect most aspects of both what the

-

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organisajon does and how it does it.

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O
Leadership Styles for Strategic Change
Johnson, Scholes and Whiongton (JS&W) idenjfy five leadership styles
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that can be used in managing strategic change.

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~1. Educajon and communicajon – explanajon of the reasons for

> -
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and means of strategic change

2. Collaborajon or parjcipajon – involvement of those who will
=>
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be affected by strategic change in the change agenda.

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3. Intervenjon – coordinajon of and authority over processes of

-

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change by a change agent who delegates elements of the

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change process.
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4. Direcjon – use of top-down managerial authority to establish a

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clear future strategy and how change will occur.

-
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-5. Coercion – imposijon of change or issuing edicts about change.

-
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-
=
This is the explicit use of power
= and may be necessary if the
organisajon is facing a crisis.
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Change agent – an individual or group that helps to bring about

- = - &

strategic change in an organisajon.

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 Style Means/Context Benefits Problems Circumstances
and
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EffecZveness
EducaZon and Group briefings assume Overcome lack of Time consuming
① communicaZon
---
internalisajon of strategic informajon Direcjon or

]
-

=
=

- -
Incremental
logic and trust of top progress may be -

change or long-
management unclear
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Y
-
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jme horizontal
CollaboraZon/ Involvement in seong the Increase ownership of Time consuming
transformajonal
②
- -

parZcipaZon strategy agenda and/or a decision or process. Solujons/ outcome

>

-
change
E
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resolving strategic issues by May improve =

quality within exisjng
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--
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task forces or groups of decisions paradigm

= IntervenZon Change
coordinajon/
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agent retains Process is guided/
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control: controlled
-
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but
Risk of perceived Incremental or
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manipulajon
-
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non-crisis
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delegates elements of involvement takes transformajonal

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↓
change place change
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④ DirecZon Use of authority to set Clarity and speed

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direcjon and means of

-
-
-
Risk of lack of Transformajonal
= and ill- change
acceptance
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change conceived strategy

Coercion Explicit use of power May be successful in Least successful Crisis, rapid
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through edict crises or state of unless crisis transformajonal

- >
-

confusion change or
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change in
established
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autocrajc
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cultures
u
~
 Responsible Leadership the responses of stakeholders into the organisation’s decision-making
processes.
Responsible leadership refers to a leadership approach that:
- -
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Collective action and shared responsibility

• Recognizes the impact of decisions on all stakeholders, not just
- >
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=
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shareholders. It is not usually a single person or organisation that is responsible for

=
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Emphasizes ethical, sustainable, and inclusive practices. creating unethical, irresponsible or unsustainable conditions in global
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• - = -

Seeks to create long-term value for society, not just short-term business. Responsible management therefore stresses that collective
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• - - -
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profits. problem solving and shared responsibility is required if successful and

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positive change is to be achieved for all stakeholder groups. The

- -

Common themes and aspects of responsible leadership

problem is in accommodating conflicting goals.
=

> Ethical judgment

Public Interest and Public value
-

- -

Particularly in a global environment, leaders are likely to face a range

-
-
>
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Public interest – "The collecjve well-being of the community of people
of rules and regulations and may have to engage with a variety of
-

- - - -
= -
- -
and insjtujons the professional accountant serves."
cultural norms and operate in contexts where there might be
- -
- -

insufficient legal guidance. Responsible leaders therefore need to be Public value is created when leadership decisions improve social
-

-
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able to critically question norms of business conduct that they deem to outcomes—e.g., reducing environmental harm, increasing
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be wrong and take a view on local conditions, whether that be in the transparency, or supporting financial inclusion.
- - - - -

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organisation or within wider society. This means they should speak up

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Value is created when a proposed strategy is supported by customers,

about unethical practices. - - -

stakeholders, the community and so on (the authorising environment)

- - -
-
A force for good
-
and when the organisation has the capacity and expertise to execute
that strategy (operational capacity). In other words, when the
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Responsible leaders should help to remedy injustice both within the =

- -
organisation’s goals mirror stakeholders’ desires and the organisation
organisation and within wider society. They thereforeO not only aim to
- -

=
-
can produce the desired products or services, public value is generated.
do what is best for the organisation, but also to be a general force for
- -

good that brings about positive change.

-
-

>
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Long-term and forward-looking
Responsible leaders make efforts to prevent accidents and scandals,
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they consider the consequences of their actions and decisions on all

=> - -

stakeholders and they orient their thinking to the long term.

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es Effective communication
Responsible leadership requires recognition of all stakeholder groups,
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establishing clear channels of communication, using those channels to

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E

engage with stakeholders on their areas of interest and incorporating

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 Codes of Ethics for Accounting Professionals (IESBA and Others) Conflict of Interest:
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Professional codes of ethics set standards for behavior that maintain

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Happens when a professional has personal or financial interests that
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trust, integrity, and objectivity in the accounting and finance could improperly influence professional judgment.
- -

- - - --

profession.
-
- -

-
- A situation in which a person has a private or personal interest
>
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sufficient-==
-

The International Ethics Standards Board for Accountants (IESBA) to appear to influence the objective exercise of
Code is widely adopted globally and sets out five fundamental their official duties (e.g. as a public official, employee or
-

principles: professional).
- A situation which has the potential to undermine a person's
-Integrity – being straightforward and honest in all professional -
& -

~ -
- impartiality because of the possibility of divergence between that
and business relationships.
-
-
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person's self-interest and a professional or public interest.

~ Objectivity – not to compromise professional or business
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- A person's or organisation's obligation to act in the interests of

-

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judgments because of bias, conflict of interest or undue influence

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- - - - -
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another is interfered with by a competing interest which may

of others.
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- - -

obstruct- the fulfilment of that obligation (Crane and Matten).

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- Professional
- -
competence and due =>
care – to maintain the -

professional knowledge and skill required to provide employers

- -
Recommended Resolutions:
and clients with competent professional service, and to act
- -
• Disclosure to relevant parties
diligently and in accordance with technical and professional - -

-
- - -
• Withdrawal from conflicting roles
standards. - -

• Escalation to a higher authority

~- Confidentiality – respect for the confidentiality of information
- - -
•
- -

Consultation with professional bodies or legal advisers

acquired as a result of professional and business relationships. -

Whistleblowing if unlawful activity is suspected

-

•
Such information must not be: -
-

o disclosed to third parties without proper and specific

-
ACCA conflict resolution
authority unless there is a legal or professional right or duty
- -
-

to disclose;
-
The ACCA Code of Ethics and Conduct suggests that the matters to
- -
- -
-

o used for the personal advantage of the professional consider when dealing with an ethical conflict should include:
- &

- relevant facts;
-

~
-

accountant or third parties.

-

- ethical issues;
-- Professional behaviour – compliance with relevant laws and
- => -
~
~- fundamental principles;
regulations and avoidance of any action that may discredit the
- established internal procedures;
profession.
=>

~
- S > =>

-- alternative courses of action and their consequences; and

-

-- internal and external sources of consultation available.

*
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The process undertaken to resolve a conflict may be formal or informal.

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However, ethical issues should always be documented together with

-

-- -

any discussion or decisions taken.

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 Ethical Threats and Safeguards
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- Misleading product information (e.g. suggesting unproven health
benefits).
= -

An ethical threat arises when an individual or organisation faces a

-
- -

- Price manipulation, excessive pricing, price fixing, deceptive

situation in which an ethical code or standards cannot be followed.
-

=
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pricing (e.g. advertising low air fares before taxes are added).
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G
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Causes of ethical threats and failures include: - Failing to comply with regulations.
The preparation and/or use of false or misleading information.
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- Cultural differences, resulting in different expectations and

-
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- - -

practices.
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- Opportunities where ethical problems are not reported or

- - -
Ethical Threat Categories
discovered.
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- Lack of opportunities for rectification due to lack of resources.

-
Compliance with the fundamental principles may potentially be
>
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threatened by a broad range of circumstances. Many threats fall into

& -

- Failure to recognise the ethical dimensions of situations, lack of

-
- &

the following categories:

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ethical sensitivity.
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- Lack of understanding of the issues and consequences.

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-- Self-interest (e.g. as a result of the financial or other interests of
- Rationalisation of unethical behaviour as part of the embedded -
- -
- - - -
members or of immediate or close family members).
culture.
Self-review (e.g. when a previous judgement needs to be re-
- - - -

-
=>
- Inability to withstand pressures from management, peers or - -

evaluated by individuals responsible for that judgement).

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-
-

outside interests. & -

Advocacy (i.e. promoting a position or opinion to the point that

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=>-
- Absence of leadership in organisations. -
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subsequent objectivity may be compromised).

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- Lack of ethical education and knowledge.

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-
-

Familiarity (i.e. where, because of a close relationship, there is

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=-
Lack of effective corporate governance.
-

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too much sympathy for the interests of others).
G
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Intimidation (i.e. where actual or perceived, direct or indirect

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Examples of ethical issues which arise in business include: >

--
- >
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threats are a deterrent to objective action).

- Misuse of power (e.g. creating unfair terms and conditions of - -

supply through the power of being a buyer).

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- Preferential treatment (e.g. to loyal customers or key suppliers).

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Safeguards to Prevent/Mitigate Threats
- Offering gifts, bribes or hospitality.
- - - If an identified threat is not at an “acceptable level”, the professional
- Accepting gifts, bribes or hospitality. - - - -

- - accountant must address it in one of three ways:

- Being "economical with the truth".
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- Industrial espionage (e.g. burglary, hacking, bugging). 1. Eliminate the circumstances, including interests or
-z - - -

- "Dirty tricks" (e.g. stealing customers, predatory pricing, relationships, that are creating the threats;
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sabotage). 2. Apply safeguards, where available and capable of being

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Collusion and cartels. applied, to reduce the threats to an acceptable level; or

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-

-
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Continuing to sell a product that is known to be, or is potentially, 3. Decline or end the specific professional activity. This may be
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- - - -
- - - =

unsafe. the only course of action (i.e. when a threat cannot be

-
-

-
F - -

Misleading marketing, targeting vulnerable consumers. eliminated or reduced to an acceptable level through
-

- -
-

safeguards).
=> - -
Definition Fraud, Bribery and Corruption
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=>
Acceptable level – a level at which a reasonable and informed third
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Fraud
party would likely conclude that the professional accountant complies
-
-

-
-
with the fundamental principles.
-

Fraud – an intenjonal act by one or more individuals involving the use

- - - =
-

of decepjon to obtain an unjust or illegal advantage.

The following conditions, policies and procedures are examples of
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factors that may be relevant

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in evaluating the level of threats to The risk of fraud strongly relates to how management (and governance)
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compliance with fundamental principles: has created a culture of honesty and ethical behaviour, supported by
- -
appropriate controls to prevent and detect fraud and error.
-

- Corporate governance requirements (e.g. to adhere to a code of

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- - - -
-

conduct).
>
-

Bribery
Educational, training and experience requirements for the
>

-
profession.
-
- -
Bribery – the offering, giving, receiving or solicijng of any item of value
-
- - - -

- Effective complaint systems which enable the professional to influence the acjons of an official or other person in charge of a
- - - - -

public or legal duty.

-----
-

accountant and the general public to draw attention to unethical

=>

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behaviour. The key elements of bribery are:

- An explicitly stated duty to report breaches of ethics requirements.
- a financial or other advantage; and
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-

- Professional or regulatory monitoring and disciplinary procedures. -

- intenjon to induce improper performance of a funcjon or to

-

- - -

Safeguards – actions, individually or in combination, taken by influence the recipient in their official capacity.
- - -

the professional accountant that effectively eliminate threats to

-

- -
- Individuals in the private or public sector who accept bribes create
compliance with the fundamental principles or reduce them to an
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- conflicts of interest. That is, they cannot accommodate the interests of

acceptable level. A safeguard must be an action by the professional
- - - - - -

another party without compromising the responsibilijes of their own

accountant (not just a consideration).
- - -

posijon.
- Having an appropriate reviewer who did not take part in the
- CorrupZon
-
professional activity review the work performed;
-

Informing TCWG of the threat (i.e. being transparent about it); The abuse of entrusted power for private gain.
-

- - =

- Assigning different individuals to a team so team members are

- - - It differenjates between "according to rule" corrupjon and "against
not affected by the threat to the activity (e.g. conflicting
-

-
-
- the rule" corrupjon:
responsibilities).
-
-

"According to rule" – facilitajon payments (bribes) are paid to receive

- - -

(preferenjal) treatment for something that the recipient is required to

-

- - - -

do -by law (e.g. -bribing a customs official to quickly process the

-

--
import/export of goods).
 "Against the rule" – the bribe is paid to obtain services the recipient is ② Top-Level Commitment
-
- - - -
-
-

prohibited from providing (e.g. bribing a customs official to clear the

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-
-
The top-level management of the organisajon must be commited to
import/export of prohibited goods). =
= -

prevenjng fraud, bribery and corrupjon by persons associated with it.

-

- -
- -

Impact
- -

③Risk Assessment
There are many and varied impacts of fraud, bribery and corrupjon.
=> - - -

Risk assessment should be periodic, informed and documented.

For example, they:
-

=> - &
-

Typical external risks include:

- distort and reduce compejjon;
-
-

- deter investment, especially foreign inward investment;

- -
- Country (e.g. where there is a systemic culture of corrupjon).
-

inflate prices;
-

Sector (e.g. extracjve industries may be pressured to make

-

-
-

-
- - - -

decrease economic performance;

-
-
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facilitajon payments to acquire mineral extracjon rights).
reduce government revenue; -
Transacjon (e.g. when tendering for a major contract).
-

-
- -

- -
-
reduce mojvajon in affected organisajons;
-

-
Typical internal risks include:
-
-

- produce poor-quality (and omen dangerous) products and services;

- -

- deliver poor-quality and reduced public services (e.g. health,

- - - - Lack of training, appropriate skills and knowledge.
educajon, transport);
-

- Remunerajon
= systems that encourage excessive risk-taking
- undermine trust in the legal and polijcal system;
- - (potenjally leading to fraud).
- -

- increase emigrajon (omen of the best-educated, most able and

-
- Lack of clarity (e.g. codes, policies and procedures are vague).
>

most honest cijzens); - Weak financial and other internal controls.

-

- cause environmental degradajon;

-

- Lack of "tone at the top". Motivation

opportunity
-

lead to degradajon of civil society to the extent that corrupjon,

-

-
④ &
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Due Diligence Risk Fraud Dishonesty

demanding and paying bribes becomes the norm – "the way of
- - => - =

business is done here".

- =

-
Due diligence procedures should be applied (taking a proporjonate
=> -

and risk-based approach) to persons who perform or will perform

-

Best PracZces to combat fraud, bribery and corrupZon -

> - -

services for or on behalf of the organisajon.

-
- - - -

For an organisajon to demonstrate that it has appropriate procedures

- -

in place to combat fraud, bribery and corrupjon, it must apply the "Know your client" (KYC) is an established procedure under money-
=
- &

laundering requirements and for client acceptance for assurance and

-

following principles: -

financial services.
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①ProporZonality
The principle of proporjonality means that prevenjve procedures ⑤CommunicaZon and Training
should be based on the② Policies and procedures must be embedded and understood
=
-

risks faced and the nature, scale and complexity

-

> -
>
throughout the organisajon through internal and external
-
-
-

of acjvijes.
=
-

- -

communicajon (including training).

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These procedures must be clear, pracjcal, accessible, effecjvely

-
-

- - #

implemented and enforced.

-
-
 Training provides the knowledge and skills needed to implement the
- -

organisajon's procedures and to encourage a "zero tolerance" culture

-

towards fraud, bribery and corrupjon.

- -
-

⑥Monitoring and Review

Organisajons operate in open and dynamic environments and, as for
----
any risk, fraud, corrupjon and bribery risk will evolve and change.
- - -
-

Controls currently in place may become ineffecjve and need to evolve

to effecjvely mijgate risks.
Feedback from training, staff surveys and known control breakdowns
- - -

provide an important source of feedback.

-

>
- -

Internal audit is an additional source of monitoring and review. The

=

team can undertake regular assessments, such as the following 4-step

-

=> -

assessment for fraud risk.

-

-- Identify the inherent fraud risk: Analyse key departments and

-
- - - -

processes and categorise fraud risks, and rate them as

-

high/medium/low.
- -

- Map controls: Perform walkthroughs of the controls to assess

- their effectiveness
-
-
-
-

~
- Identify and manage residual risk: Having designed and
=

- -
-

-
-

implemented appropriate controls for the inherent risks, the

residual risks can be identified and managed (avoid, accept, reduce
- -

or transfer)
-

- Test and continuously improve: Testing of controls and

= -

assessment of fraud risks should take place regularly.

-
-

- -