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In recent years there has been a notable increase in the number of fraud and corruption incidents brought to public attention. In extreme cases such as Parmalat and Enron, fraud and corruption have caused the loss of billions of dollars and dramatic reductions in share value. The consequences for individual shareholders have been catastrophic. Pensioners and others nearing retirement have seen their life savings wiped out, with no prospect of recovery. Even smaller cases of fraud and corruption are capable of causing widespread harm and eroding public confidence in political leaders, industrial leaders and financial institutions. The increased emphasis that lawmakers, regulators, NGOs and the UN have put on active prevention has raised general understanding that it is in the best interest of organizations and their stakeholders to manage fraud and corruption risks. As a result, organizations are increasingly interested in tools and methods for raising risk awareness, training managers and employees and ensuring that multiple channels of communication with employees are open. While spectacular
failures and top management fraud and corruption provide headline
material for the media, the larger problem may be the many
commonplace frauds which remain unreported. According to
professional fraud and corruption investigators most frauds are
never discovered at all, and many frauds which are discovered are
quietly buried. The
total cost of fraud and corruption, if this number could be
calculated, must be staggering. In fact, experts estimate it to be
between 2-5% of annual turnover. This hidden cost represents an
enormous potential for profit improvement through effective fraud
risk management.
Traditionally, organisations develop internal control systems designed to protect against all kinds of threats, including physical accidents, waste, financial risks, reporting errors, fraud, theft, and many others. While well-designed internal control systems have effectively reduced risks in many areas, effective prevention of fraud and corruption have proven difficult. One reason is that fraud and corruption often are carried out using insiders in a company who know how the control system works and are willing to break rules to circumvent it. How does Fraud-i™ Awareness The key to preventing fraud and corruption lie in mobilizing the collective knowledge and competence of employees. Traditional controls fail because employees either do not recognize obvious signs of malpractice, or, through fear or indifference, they fail to react to them. Organisations need to educate employees about fraud and corruption, motivate them to identify and reduce risks, and, above all, listen to those employees who wish to report on existing cases of fraud and potential malpractice. Most managers agree that prevention is likely to be more cost effective than addressing problems after they occur. But since fraud and corruption often go undetected, the costs are invisible and managers underestimate the size of the problem. As a result, the need for prevention is also underestimated. The high profile frauds that have occurred in recent years are causing perceptions of fraud and corruption to change, and more organisations are looking for ways to protect themselves through increased awareness. Fraud-i™ Awareness provides organisations with a solution of how to spread awareness quickly and effectively. Even when honest, loyal employees have knowledge or strong suspicions that fraud and corruption are occurring, they may be reluctant to report it. Historically, whistle-blowing has been more often punished than rewarded. As a result and at a great cost, malpractice is often allowed to continue unreported. Fraud-i™ Awareness encourages employees to report their concerns and offers instructions on how this can be done. Fraud-i™ Awareness provides users with the understanding that management is in fact interested and will act on the information they provide. Hibis' intention is that employees will be deterred from providing false and malicious information, and become motivated to provide information contributing to the well being of the organisation. |
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