Sustainable profitability is vital in today’s highly competitive business environment. This factor has therefore prompted companies to devise strategies that are in sync with this aim. While profitability has essentially always been a focus, ensuring its existence for the long term is a goal which requires a heightened level of efficiency. This can only be brought about through a thorough evaluation of processes and mechanisms, to rule out any possible fractions of wastage.
This may seem like an easy task, however consider the complexities when the team overlooks an avenue due lack of awareness. The scope of this process would severely be affected, as the possibilities of fraud were not incorporated at the onset. It is extremely critical for businesses to be aware of possible vulnerabilities prior to such tasks being undertaken. A failure to do so, results in inevitable risk.
The current situation
Fraud has evolved considerably over the past decade and it continues to do so at an alarming rate. This attribute is what makes it easier for lapses to occur. The infamous prominence that fraud has gained in recent times has prompted an entire week to be dedicated to increasing awareness about its techniques and combative mechanisms. This week (15 – 21 November 2015), declared as International Fraud Awareness Week by the Association of Certified Fraud Examiners, is an apt time to evaluate one’s stand on this front.
Let us take a closer look at what encompasses new-age perpetration and what companies are doing to fend of these challenges:
- Cyber readiness is challenging the C-Suite and Boards* – The impact of cyber breaches continues to show that organizations and their Boards must become more aggressive in developing response plans to these persistent threats. A key component for strengthening an organization’s preparedness will be increased awareness of the variety of threat actors – including “hactivists” and nation states. Regulatory bodies expect companies to provide greater transparency through more robust disclosures and to undertake actions to buttress defenses and controls.
- Increased focus on reining in corrupt practices through regulatory amends and enforcement* – The government is putting greater pressure on organizations to create ethical corporate cultures and to develop a more detailed understanding of their anti-corruption compliance programs. An important element of these programs is a robust, global third-party vetting process, continually evaluating the conduct and political exposure of joint venture partners, agents and distributors, among others.
- Forensic Data Analytics (FDA) in fraud monitoring and investigations*– EY’s 2014 Global Forensic Data Analytics Survey found that 74% of respondents indicated that Forensic Data Analytics can play a critical role in mitigating corporate bribery, a top fraud risk, and 63% of respondents agree that they need to do more to improve their anti-fraud/anti-bribery procedures, including incorporating FDA. FDA will enable legal, compliance and internal audit professionals to be more effective by allowing them to analyse greater volumes of data from disparate sources in a much more timely fashion.
- Regulated industries: Financial Services* – Global financial institutions continue to face scrutiny on the issues of money laundering, terrorist financing, economic and trade sanctions, bribery and corruption, stressing the need for robust controls and monitoring systems. Regulatory scrutiny is expected to continue to move beyond the traditional banking sector into non-banks, including insurance providers and gaming enterprises, increasing the need to review and enforce compliance programs and controls.
These trends showcase how compliance is gradually moving to the forefront in business, as fraud and corruption prove to deter companies from long-term progression. Given the current sentiment that is echoing through boardrooms, there is a strong need for awareness and subsequent action to enable improved corporate cultures.
*Source for emerging trends EY release on ‘Top Fraud and Corruption Trends for 2015’