Why protecting your business processes from fraud can bolster your resilience
It’s commonly accepted that fraud — from asset misappropriation to bribery to cybercrime — is a constant, nagging cost of doing business. But beyond that truism, what do these and other economic crimes have to do with business resilience?
As our just-released 2014 Global Economic Crime Survey (GECS), strongly suggests, the two are deeply connected.
Like a virus, fraud is both highly adaptable and opportunistic, shifting to ride the events, trends, natural disasters, and innovations remaking our world — and attacking at vulnerable points in your supply chain, distribution network, and other points of transaction with third parties. Shielding points of vulnerability against threats both known and unknown is, of course, part of what business resilience is all about.
Those points of vulnerability are many. In the connected world of 2014, one driven by the increasing use of technology in business functions and the rush of economic resources toward emerging markets, the risks of economic crime loom large. Meanwhile, various government anticorruption statutes have elevated the efforts of regulators, raising the risk of deeper damage to organisations who fall afoul of them.
But the virus metaphor only carries so far. After all, you can’t inoculate against fraud. What you can do is attempt to understand the strategic nature of the threat.
That’s why I believe it is crucial to understand the variety of business processes threatened by economic crime, and the risks they pose to your organisational resilience. A resilient organisation may not be able to predict where the next threat will arise — but to prevent or mitigate threats it needs to be just as adaptable and opportunistic as the perpetrators of fraud.
Our 2014 survey reveals that the various strains of economic crime — such as corruption and bribery, cybercrime, accounting fraud, IP infringement, or procurement fraud — continue to be major concerns for organisations of all sizes, across all regions, and in virtually every sector. Not only was overall reported economic crime up 3 percentage points, reports of especially damaging categories of fraud — such as bribery and corruption, and cybercrime — was also on the rise, relative to our last survey, which was conducted in 2011.
One of the key findings of the survey is that as companies seek growth, they invest in markets that are less familiar to them — and thus frequently expose their employees to situations with inherent conflicts between the fundamental goals of making a profit and remaining compliant.
Without strong CEO support and leadership, these situations can not only lead to significant fines and reputational damage — they can also lead employees down a slippery slope that erodes standards of integrity. And in a sign of how seriously boards and chief executives are taking both the financial and collateral damage from enforcement of statutes like the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, more than half of CEOs (52%) surveyed in our latest Global CEO Survey report being concerned about bribery and corruption.
In addition to outlining all the data from our survey, this year’s GECS report also offers an analytical look, grounded in our real-world experience, at how economic crime threatens your business processes — so you can address the key business issues from both a preventive and strategic perspective. In other words, from the point of view of organisational resilience.
I invite you to learn more by visiting our Global Economic Crime Survey site. And I welcome your questions and comments.