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Jenny.Crow
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Posted: Mon Jul 6th, 2009 16:46 |
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There is a common maxim in business that financial crime always increases in times of economic downturn. Much evidence exists to support this at the current time, from headline cases such as Madoff and Stanford, to figures from the authorities showing that reported fraud increased by 64% in the last financial year. Of most concern to business is the increased risk of fraud and theft by managers and staff.
In the early 1990s, fraud was commonly known as the "unmanaged risk" - most businesses at that time put little time and effort into anti-fraud prevention and detection controls and instead relied on a combination luck and insurance to see them through. Although the threat to reputation is much better understood today, there are still concerns that organisations remain exposed to fraud. Many businesses do not have a fraud risk profile and do not have key controls like hotlines, non-routine audits or data mining in place.
Is fraud still an unmanaged risk today and what more could businesses do to increase their controls in a cost-effective way?
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DM
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Posted: Fri Jul 17th, 2009 15:03 |
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For me, managing fraud should be part of the overal risk management strategy of any entity and not entirely an end in it self. When looking at the key focus areas of a CFO in the recent times, risk management is one of the key priorities and in my organisation, i have deveped a risk matrix to manage the various financial and operational risks that are inherent in the business and are emerging too.
I attended one Deloitte Fraud management seminar and it was mentioned that there is a potential in many people to be involved in fraud given the slightest opportunity and this is true in the current downturn.
Risk management was previously left as a technical field with only a few people understanding models and financial derivatives. As a finance person, its becoming increasingly important to demistify the myths around models and risk reports and ensure that we are engaged in the risk management process from the time the risk management policy is established, to board approval and reporting.
It is not an expensive exercise i believe and finance people need to see risk management from an opportunity cost perspective - answering the question: if we do not put safeguards, what will be the impact of shrinkage and fraud on the bottom line??
Dony Mazingaizo, ACCA
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DM
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Posted: Fri Jul 17th, 2009 15:05 |
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For me, managing fraud should be part of the overal risk management strategy of any entity and not entirely an end in it self. When looking at the key focus areas of a CFO in the recent times, risk management is one of the key priorities and in my organisation, i have deveped a risk matrix to manage the various financial and operational risks that are inherent in the business and are emerging too.
I attended one Deloitte Fraud management seminar and it was mentioned that there is a potential in many people to be involved in fraud given the slightest opportunity and this is true in the current downturn.
Risk management was previously left as a technical field with only a few people understanding models and financial derivatives. As a finance person, its becoming increasingly important to demistify the myths around models and risk reports and ensure that we are engaged in the risk management process from the time the risk management policy is established, to board approval and reporting.
It is not an expensive exercise i believe and finance people need to see risk management from an opportunity cost perspective - answering the question: if we do not put safeguards, what will be the impact of shrinkage and fraud on the bottom line??
Dony Mazingaizo, ACCA
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DM
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Posted: Fri Jul 17th, 2009 15:05 |
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For me, managing fraud should be part of the overal risk management strategy of any entity and not entirely an end in it self. When looking at the key focus areas of a CFO in the recent times, risk management is one of the key priorities and in my organisation, i have deveped a risk matrix to manage the various financial and operational risks that are inherent in the business and are emerging too.
I attended one Deloitte Fraud management seminar and it was mentioned that there is a potential in many people to be involved in fraud given the slightest opportunity and this is true in the current downturn.
Risk management was previously left as a technical field with only a few people understanding models and financial derivatives. As a finance person, its becoming increasingly important to demistify the myths around models and risk reports and ensure that we are engaged in the risk management process from the time the risk management policy is established, to board approval and reporting.
It is not an expensive exercise i believe and finance people need to see risk management from an opportunity cost perspective - answering the question: if we do not put safeguards, what will be the impact of shrinkage and fraud on the bottom line??
Dony Mazingaizo, ACCA
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jibril shehu mustapha
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Posted: Fri Jul 17th, 2009 18:20 |
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| Financial crime is always increasing becouse of the incapability,inexperiance,of the present financial advisers been employed by govt.agencies and private sectors.jibril zamfara nigeria.
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Chriswill
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Posted: Tue Jul 21st, 2009 08:32 |
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All manner of Financial risk management can be put in place but this can only delay the process before someone finds a way of defrauding an orgainisation. My take would be to instill management professional ethics in the managers of organisations.
Upcoming managers need to have good mentors to lead them as they climb the ladder.
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elnur_osmanov
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Posted: Fri Aug 7th, 2009 07:22 |
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| I think that to solve this problem you should prepare system of documentation and authorisation for those processes in your company where smbdy can do crime. And every operation should pass from 2 or 3 persons.
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donaldd6
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Posted: Wed Aug 12th, 2009 04:30 |
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| Authorities and regulators must look beyond the obvious to be able to tackle this evil that has eaten so deep into our business fabrics. There must be proper and standard internal control measures set at every level of an organisation to reduce the temptation of fraudulent practices
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FutolaHappie
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Posted: Wed Aug 12th, 2009 16:19 |
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My stake on this is that a strong risk mangement regime should be implemented and monitored and subjected to periodic reviews. The risk management tool should identify all potential areas where fraud is likely to be committed. In recession times when resources are really scarcy i would think companies should have a very tight control system to ensure resources do not get lost easily! This of course (prev statement) does not mean that when times are good employees should be allowed to line their pockets with stolen loot! Controls and Risk management must be the mainstay of the CEO, CFO, CIO and all the relevant officers in a transparent system.
Where segregation of duty is enforced as an anti-dote to crime, the control and risk mgt regime should be as transparent as possible with very good auditable trails and adequate checks and balances in place in order to send the necesary signals in time.
An attitude of alertness therefore must be there at all times. In security operations they say 'trust no-one but use every opportunity to manage information and people to the maximum'
Happy Lifweba FCCA
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seboist
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Posted: Sat Oct 3rd, 2009 15:06 |
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| Fraud can not be stopped altogether but can be minimised. Yes it is still an unmanaged risk in all businesses whether small or big. Management should bring more controls.
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Ladi Folorunsho
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Posted: Tue Oct 13th, 2009 13:22 |
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Every business would ordinarily put in place measures to curb financial improprieties and all forms of fund abuses, but recent scandals in corporate organizations have suggested that even blue chip companies have the problem of fraud risk. The following measures could be put in place to checkmate this deadly trends:
A) Implementation of strong corporate governance measures to checkmate the seeming excesses of the executives. This involve the following:
.separation of the role of chief executive and that of the chairman to ensure that no single individual hold too much power
.setting up of nomination committee to ensure the appointment of senior executive are based on merit and rigorous process of selection. The nomination committee should be made up of non-executive director who should not have any other financial interest in the company except as to their fees and if probably be a shareholder of the company. And also for a non-executive director to be truly independent he must not have cross-directorship with any other executive directors.
.Remuneration committee made up of non-executive directors having the aforementioned qualities should be set up to fix the remunerations of executive directors. this will enable the control of excessive non productive packages paid to directors
. The setting up of Audit Committee(made up of non-executive directors) should be in place to ensure that all forms of risk inclusive fraud risk are managed and control by the management. The Internal Audit department should report to this committee.
All the aforementioned are the necessary sub-committees under the management board to ensure the efficient and effective management of all forms of risks.
.Lastly the internal audit department should be set up to provide the daily and routine controls financial and otherwise which will ensure the adequate safeguards of assets and the efficient running of the organization. The Internal audit department should be given enough/competent resources both human and other resources to function perfectly well. Their reporting level should be to the board audit committee.
if all these measures are in place the mitigation of all forms of corporate risk (fraud risk inclusive) will be mitigated to the acceptable/bearable level.
Ladi Folorunsho ACA
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Alastair Goddin
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Posted: Tue Oct 20th, 2009 09:28 |
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A risk mangement framework, if correctly implemented, should report the board's appetite for risk, including the risk of internal fraud. It should also give some indicators for the likelihood of frauds at various probabilities / return periods. A risk management framework will not, and should not, prevent fraud. A very tight control environment may prevent most fraud, however I would argue that the main drivers of fraud are low morale and external factors (often personal) affecting staff, both of which can only be detected through 'softer' people controls.
Tightly knit teams, where any unusual behaviour is quickly noticed, are therefore the best controls over fraud. The alternative is to opt for a bigger, more geographically diversified and flexible structure and accept that there is a risk of low level frauds every few years. Typical cash and banking controls should detect larger frauds in either situation.
I suspect that the cost of insurance fraud is greater than fraud committed within companies.
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