The adage that the people make the company is still true today. Human resources account for the single largest expense item in nearly every company across industry sectors – and for good reason. Employees from executives to staff support your brand and provide for innovation to sustain and improve your company. Unfortunately, humans are fallible, not just inherently, but also by intent.
Kroll’s 2013/2014 Global Fraud Report found a signiﬁcant increase in the prevalence of fraud in the United States and Canada. In the U.S. the report found a 31% increase in management conﬂict of interest, a 143% increase in regulatory and compliance fraud, a 400% increase in money laundering, and a 50% increase in IP theft. While in Canada, companies lost 1.7% of revenues to fraud compared to the global average of 1.4%; driven by the high incidence of management conflict of interest and information theft (29% vs 22% globally).
So what is driving the increase in fraud? Some would advocate that our societies have lost their moral compass. Although our societies may be more tolerate, or de-sensitized to fraud, the regulatory environment we operate in is not reflective of this. An objective investigation and analysis of the increase points to the near-constant evolution of technologically complex systems with a host of external interfaces and increasing access to information. Of course, having access to information is only as valuable as the demand for the information.
The black market in information trading is rampant. Trade secrets, insider information, even seemingly harmless information about a company is easily and readily shared. The efficiency and low-cost of information trading is unprecedented, and the risk are minimal. The anonymity provided by technology, and instantaneous data and file sharing on a global scale facilitate a catch-me-if-you-can black-market environment. Even when the perpetrators are identified, a global legal process for these crimes has not been established, in part because of nation-states involvement in the offending action.
Deterrence has always played a key role in crime prevention. Without deterrence as the means to fight fraud prevention and manage risk we must strengthen the other tools in our toolbox. But how do we know what tools to use unless we know what our exposure is.
No company wants to forgo the best-of-breed information system as a risk management approach. Today, our IT posture determines our ability to connect, respond and service our customers, vendors and investors. Likewise, limiting access to information can be problematic from an efficiency an innovation standpoint. We rely on a highly integrated operating environment to create and maintain any available margin of competitive advantageous.
The only way to really know what your exposure is, and how to manage the pertinent risks, is to perform a thorough investigation to discover all potential – and unknown losses – and develop a strategic plan to mitigate the risks/losses. According to the Kroll report, 21% of respondents thought they were highly vulnerable to information theft. If you suspect, or simply don’t know, if you are susceptible, engage an accredited financial forensic professional with extensive white-collar criminal experience. In every case we have been involved in – regardless of the specific discoveries – the marginal benefit of the engagement exceeded the marginal cost for our clients.