Towards the end of 2017, and during the first two months of 2018, the South African public has read a lot of reports regarding poor corporate governance within large corporations, accounting irregularities within some of these same corporations, and corruption within the highest office of the land.
Just how bad is the situation? Following on from the fall outs that we have seen being played out very publicly, PricewaterhouseCoopers released their 2018 Global Economic Crime and Fraud Survey where it said that South Africa was the highest ranked country in the world when it come to economic crime.
A harsh reality
The survey found that South African organisations that have experienced economic crime
now stand at a staggering 77%. The survey adds that companies today face fraud risk from various avenues which include internal, external, regulatory and reputational risks.
What is concerning is the fact that the survey found that senior management is taking centre stage as a growing threat from within organisations. The face of the threat evolves as fraud committed by consumers also comes out of the shadows to rank as the second most reported economic crime in the country.
Obviously, this is a problem when it comes to dealing with clients and business partners who want to deal with a company who ticks the right boxes when it comes to good corporate governance and fighting against corruption.
How do companies reassure investors when the tone at the top does not correspond with action from the top?
Addressing the blind spots
While economic crime does exist in the rest of the world, it is particularly rife in South Africa. We are more aware of it and that is why we have to make more of a concerted effort to try and address the situation.
But are we taking a wholistic approach when it comes to battling economic crime, or are there blind spots which we are just not that aware of?
The PWC Survey points out that it is time for honest organisational introspection so that we can emerge stronger and more effective in the global fight against economic crime and fraud.
While no one can deny that the enemy is at the gates, an interpretation of the survey’s results is that South African organisations are more aware than their global colleagues of the scourge of fraud and economic crime.
The survey adds that this challenge is exacerbated by the vulnerability of organisations to blind spots which are the cracks that are found in the overall awareness or responsibility matrix of even the most successfully run businesses.
“Dictionaries provide us with a very clear definition of fraud. However, if you were to ask around a boardroom what fraud means to the individual executives charged with the responsibility of managing the various moving parts that make up an organisation, you will get very disparate views. The waters get even murkier when you start talking about responsibilities. A fragmented idea of responsibility is what creates the gaps where fraud festers, and this has devastating effects on the overall effectiveness of fraud prevention efforts, regulatory outcomes and, ultimately, financial performance,” said Trevor White, Partner: Forensic Services at PWC.
Master the small challenges
Even with the blind spots within a company, sometimes a corporation is just too large for the company to never face an economic crime of some sort, be it internally or from clients.
When it comes time to addressing the issue of economic crime. The devil is rooted in the detail. Companies need to learn to master the small challenges.
“Part of the maturing process, for companies as well as countries, comes from weathering storms. According to a global study, when a crisis or unplanned event is well managed, 83% of CEOs report experiencing no negative impact on revenue growth,” said White.
Technology is a major role player when it comes to the risk of economic crime. The survey points out that when it comes to fraud, technology can be a double-edged sword, acting as both a business threat and a business protector.
These areas traditionally resided at the operational level of the business, forming its second line of defence.
“Technology has become so pervasive across every business process, including customer facing areas, that how you leverage it to combat fraud (the balance you strike between safety and overzealousness) is now central to the customer experience. And that makes it a vital issue for senior management as well,” concluded White.
It is important that companies do not get despondent and think that this is an unsolvable problem. Companies need to return to basics, look at the culture within their companies and draw up effective risk management programmes that addresses economic crime. Is this easily achievable? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts firstname.lastname@example.org.
This article is published courtesy of FANews https://www.fanews.co.za/article/fraud-crime/5/general/1094/tackling-a-serious-issue-head-on/23979