Globalization has truly changed the world, altering the contours of business and geographical boundaries no longer pose serious limits to the conduct of organizations. Technology coupled with the business necessities has enabled the operations of companies to be widespread over many different countries, time zones, markets and regulatory regimes.
Companies worldwide are striving to survive in highly adverse economic and extremely competitive conditions impacting their ability to enforce ethical business conduct. With the increased focus on the emerging markets, the risks come associated with the new opportunities where many of these markets have high incidences of fraud, bribery and corruption.
At the same time, the global regulatory environment has also seen a tremendous change with the enacting of several fraud disclosure and anti-bribery legislations like the US Foreign Corrupt Practices Act & UK Bribery Act, to name a few. With this, regulatory bodies like the US Department of Justice, Securities and Exchange Commission and others have also brought into their focus, the conduct followed by companies in geographies even outside the US.
Partly compelled by regulatory enforcement, while companies have resorted to tighten corporate compliance guidelines and establish anti-fraud mechanisms like whistleblowing provisions, fraud investigations etc., they have yet to see widespread adoption. It is hence not surprising that bribery and corruption forms the top most concern (65%) for fraud risk in companies, as per the EY’s Global Forensic Data Analytics Survey 2014. This is followed by asset misappropriation (60%) and capital projects (49%).
Currently, a majority of the current anti-fraud solutions employed by companies revolve around spreadsheet and database tools such as Microsoft Excel, Microsoft Access etc., depending on quantitative and basic descriptive data which are primarily reactive in nature. In the absence of more sophisticated tools like Forensic Analytics Software, Text Analytics and Social Media Monitoring tools etc., there is an impact on the effectiveness of the anti-fraud framework currently employed by these companies.
To significantly reduce the lag time between the incidence of fraud and the detection, adopting of Continuous Monitoring Programs including governance, risk and compliance (GRC) tools along with sophisticated visualization and forensic technologies using Big Data is a must.
Basically, Continuous Monitoring Programs integrate much better into the ERP systems and business processes of the companies, typically implemented with alert mechanisms. These automatically alert the management of any suspicious transactions or authorizations as per the configured guidance rules. Although this system does not operate on a real-time basis to avoid impeding any critical business processes, the insight and overview that it offers to the top management or the internal compliance committees has hardly any lag.
As per the Global Forensic Data Analytics Survey 2014, respondents using technologies beyond the basic tools have generally observed 11% more improved results and recoveries, 15% earlier detection of misconduct as well as 14% more cost-effective results.
Companies have substantial benefits associated with speeding up detection of fraud to assist not only recoveries but also plug the gaps in their systems quickly to avoid perpetration of similar frauds. This is needed not only for the preservation of faith and goodwill of the regulators and general public in their control and corporate governance procedures, but is also a simple and an effective way to create value for all stakeholders.