Page 45 - CMA Journal (May-June 2025)

c
c
t
t
c
c
c
c
c
t
t
ti
t
t
t
t
t
t
t
c
S
S
S
S
S
S
Sec
S
S
S
c
e
c
c
e
e
e
e
e
o
o
n
o
o
o
o
o
o
n
n
n
n
n
n
n
n
n
n
o
i
i
i
i
i
i
i
i
i
i
o
o
o
o
i
i
i
i
i
S
c
c
c
c
c
u
u
c
u
c
o
o
Focus Section
F F F F F F F F F F F F F F F
o
o
o
o
o
u
s
s
s
s
u
u
u

S
S
s
s
s
s
u
u
u
Corruption and the Rising
Cost of Business Operations
Cost control is the first consideration in running any trust but also disrupt
business, company, or even in preparing a realistic the economy,
national budget. Losses arise when costs exceed affecting private
revenues and there is no effective procedure for businesses - whether
managing them. Finance is the lifeblood of any activity they are knowingly
required to run a business, and all efforts are typically involved or not.
directed toward plugging leakages and addressing
Corruption has signifi-
loopholes to maintain financial control.
cant social and
Understanding Operational Costs economic conse-
quences. It dispropor-
a) For Businesses: Operational costs refer to the
tionately affects those
expenses incurred during a regular business cycle to Muhammad Moin
who are most vulnera-
keep operations running and ensure business
ble in the business Ahmed, ACMA
continuity. These costs are typically met through
community and limits Finance Manager,
revenues or capital injections. They include the cost
public access to essen- Prestige Kitchens Pvt. Ltd.
of goods sold (COGS) and operating expenses such
tial services like
as rent, raw materials, payroll, and insurance.
education, healthcare, and legal aid. In effect, it deprives
Businesses aim to control these costs to ensure
people of their fundamental rights.
smooth operations and long-term growth.
How Corruption Increases Operational Cost
b) For Governments: A country’s operational costs
include expenditures required to manage various Corruption can have devastating results for a country’s
government functions. Key areas include salaries of economy and businesses. One of the major impacts of
government employees, debt servicing, defense, corruption is an increase in the operational costs of
healthcare, education, infrastructure, and develop- businesses and the country overall. There are three basic
ment. These are covered through revenues, loans, and forms of corruption prevailing in almost every country:
other sources, as outlined in the national budget. The
a) Bribery and Undue Pressure: It is the act of offering
outcome is either a fiscal deficit or surplus, depending
and accepting bribes to influence business decisions
on economic conditions.
or gain favor. To run operations, businesses need
What Is Considered Corruption different types of legal documents, permits, and
licenses. When they apply for these documents, they
Corruption can be described as deceitful or unethical are forced to pay bribes to government officials in
behavior by individuals in positions of power—such as various departments. After paying these undue
high-ranking government officials or owners of large amounts of money, the cost of running the business
businesses. These individuals may abuse their authority increases, and as a result, the prices become higher
to gain personal benefits at the expense of others. This to cover the cost and profits.
often includes dishonest practices such as accepting or
offering bribes, making secret deals, and violating the b) Favoritism or Preferential Treatment: It is the
rights of deserving individuals. practice of giving favor or preference to family
members in business or professional matters. It can
More severe forms of corruption among government lead to the unjustified allocation of available
officials include election rigging, misappropriation of resources, as decisions are made based on personal
public funds, money laundering, and misleading connections rather than merit or economic
potential investors. Such actions not only harm public considerations.
ICMA’s Chartered Management Accountant, May-June 2025 43