It is well-established that fraud and other types of financial misconduct increase in times of disruption and business stress which unfortunately is the case with the current pandemic. The following are some elements that exacerbate the risk of fraud and corruption:
Rationalisation of staff numbers and other resources leading to reduced capacity to implement controls.
Remote or other alternative working conditions implemented with short notice create short-cuts or work-arounds to established business processes.
Financial distress and/or fear of future financial stress creating increased motivation.
Senior managers having reduced bandwidth and resources to manage high levels of risk across multiple areas at once.
Changes to supply chains due to restrictions, leading to potentially compromised decision-making for convenience and responsiveness.
In promoting integrity and compliance in organisations, it is important to consider and
progress both hard and soft controls; hard controls being Code of Conduct, policies, procedures, monitoring and controls and soft controls being about culture, ways of working, custom and practice. In a recent discussion with the Australian Financial Crime Summit, Alan MacSporran, QC Chairperson at the Crime and Corruption Commission Queensland described stand-outs in response to issues of misconduct in local councils.
Robust policies and procedures including financial, governance, procurement, recruitment etc.
Independent internal auditors as a role to be taken seriously to keep a constant check on activity.
Transparency and accountability in culture led from the top.
Investigations undertaken and findings published as a powerful deterrent message.
“Culture starts at the top, with senior managers and leaders in the organisation needing to have a set of clearly defined, appropriate values, and to live by and promote those values. As leaders, they’re setting the example for everyone else, and other employees taking their cues from the way their leaders behave. They need to be consistent, fair, and accountable and have everyone understanding that they are to live by those values, and more particularly that they are to feel comfortable and feel obliged to always report misconduct.” Alan MacSporran QC (Reducing Misconduct through Transparent Organisational Culture, 2020)
The focus in this report and others from the Crime and Corruption Commission highlight the critical role of leadership and culture in addition to formal structures.
The following is a checklist of things for you to consider to prevent or mitigate the impact of fraud or misconduct in your organisation:
Do you have integrity and compliance systems in place including robust policies and procedures that are regularly reviewed?
Do you have an internal auditor or an integrity and compliance officer with a degree of independence with a focus on monitoring and effective controls?
Do you have a Whistleblower policy and reporting process? Is it clear and known to everyone?
Do key managers understand fact-finding and investigations processes? Do you have key strategies in place on decisions to engage an independent investigator?
Do you have adequate training in place on policies, procedures, reporting?
Have you articulated in your organisation a set of consistent values that are modelled and frequently discussed?
Do you have adequate training on leadership and management?
Having worked closely with organisations impacted by misconduct, we are passionate about working with people to get on the front foot to create and implement sustainable hard and soft measures including investigations, integrity and compliance systems, whistleblowing protections, leadership and training.
Contact the team at Sharpe Workplace Solutions to access valuable advice, support and products to prevent or mitigate the impact of fraud or misconduct in your organisation.
MacSporran, A., 2020. Reducing Misconduct Through Transparent Organisational Culture. [online] Australian Financial Crime Summit 2020. Available at: http://alan-macsporran-afcB91D0uqqInY7g4pgVZN8EBN109YYXxiZYXsXsDzC.pdf[Accessed 1 June 2020].