How Does Your Business Combat Fraud?
KPMG Integrity Survey 2013
Fraud Awareness Week for 2015 is nearly over. But just because the week is over, doesn’t mean fraud is going to stop in its tracks. The fight against fraud will continue.
Every company needs to continue its fraud prevention fight and never stop doing it. We’re closing down this year’s Fraud Awareness week with a few key points from KPMG’s Integrity Survey from 2013. The full survey can be found here. This survey looks into corporate fraud and misconduct and contains data pulled from the experiences and perceptions of more than 3500 employees in the US.
Companies should never stop attempting to understand the risks of occupational fraud and abuse, and the import role that effective ethics and compliance programs have on fraud prevention measures. A few key takeaways from the KPMG survey include:
- 73% of employees in the survey reported that they had observed misconduct in the prior 12-month period. 56% reported that what they had observed could cause “significant loss of public trust if discovered”
- The prevalence of misconduct that could cause a “significant loss of public trust if discovered” was an increase from the previous 2009 survey
- One of the most commonly-cited drivers of misconduct continued to be attributed to pressure to do “whatever it takes” to meet business goals. Other causes included not taking the organization’s code of conduct seriously, having systems in place that rewarded results over means, and the fear of losing ones job if targets were not met
- While the tendency to report misconduct to an ethics hotline increased, employee willingness to look the other way and do nothing or to report misconduct outside the organization also increased. This demonstrates a continuing need for organizations to enhance the effectiveness of their internal reporting systems
- Having in place formal ethics and compliance programs continues to make a positive difference. Employees who work in companies with programs generally reported more favorable results across the board than employees who work in companies without such programs
The threat of occupational fraud looms over every business, any size, stature, or function. It’s safe to say that where there are employees, at some point in time there may be some form of occupational fraud and abuse. Thinking that fraud will only happen to another company is not smart fraud fighting measures. Every employee at every level is capable of committing fraud, from top level executives to entry-level clerks. Research indicates that levels of occupational fraud and abuse are staggeringly high, both in their cost and in their rate of occurrence.
In most acts of fraud, three circumstances lead to the commencement of that fraud – the incentive to commit the fraud, the opportunity to carry out the fraud, and the ability to rationalize or justify why the participation in the fraud was necessary. This is known as the Fraud Triangle.
But many studies show that more fraud is detected by anonymous employee tips than by all other means combined. While it is important to continue to utilize multiple fraud deterrent methods such as external audits, separation of duties, and fraud awareness training, the most important tool an organization can implement is a confidential reporting hotline. A hotline is simple, providing an immediate means of communication that offers support and encouragement to employees.
Download an eBook that gives you a few reasons why any business should implement an ethics reporting program.