Fighting Fraud Effectively
Fighting fraud effectively can sometimes be a daunting task and I am often reminded of that in unusual places. Case in point, recently a piece about a critical infrastructure project in Iceland, which involves the construction of an essential highway in Reykjavik, got my attention.
Now as a fraud professional, construction projects really don’t show up on my radar screen, unless of course they’re riddled with deceit, kickbacks or fraudulent practices, which has been known to happen. That, however, wasn’t the case here.
In this instance, what struck me as interesting was that the construction project was halted due to “elves” (referred to as Huldufolk: Icelandic folk belief for “hidden people”) who supposedly reside under rocks which are directly in the path of the new highway project.
Clearly, the agenda of people concerned about Iceland’s elf population was lost on the government wanting to build the much needed highway prior to moving forward with the project. While that story was about elves, Iceland, an infrastructure project, hidden agendas and project delays, the analogy to similar project issues associated with fighting fraud effectively and the development of anti-fraud programs makes for a great segue.
Getting the “right” stakeholders to the table is paramount
In the various training sessions we provide and numerous articles we’ve written, we’ve talked extensively about fighting fraud effectively and the necessity to get all the key stakeholders to the table when discussing fraud strategy.
To underscore the importance of this point, in the Iceland example they didn’t get all the key stakeholders to the table and it effectively shut down a much needed piece of roadway which would benefit its residents. This is exactly the same kind of paralyzing revelation which often shuts down a company’s anti-fraud efforts and prevents them from effective fraud fighting.
More importantly, perhaps is what getting key players to the anti-fraud table says about companies to interested observers like shareholders, regulators and the news media who are watching to see how the company safeguards investment and revenues.
When key players and decisions makers are sitting at the table together mapping the road to fraud risk mitigation, it represents management’s emphasis on preventing, detecting and investigating fraud through a unified fraud strategy which is absolutely essential to success.
Wanted: Decision Makers
Some companies define anti-fraud success as having employees from representative departments at their anti-fraud roundtable but the reality is that a company’s fraud fighting success or failure may hinge on the decision making authority of the members of the roundtable.
If members do not have decision making authority, then the anti-fraud roundtable is mired in ineffectiveness, with the constant “let me go back and check on that with my boss” mentality. This causes significant bureaucratic business and communication delays, which usually derails an entities ability to manage and prevent fraud.
The key consideration here is that if an employee has to “go check with a decision maker” before coming back to the members of the roundtable with an update then it is the decision maker who should be sitting at the table and NOT their staff representative.
Discover Hidden Agendas
The Icelandic elf example (hidden people) and their spokespeople are an excellent analogy to the various categories of employees who are needed at the table when discussing fraud. The use of the word “hidden” in the elf definition provides us with an interesting business correlation as department heads, senior management and C-level executives often have their own “hidden” agendas (HA’s) which need to be brought to the table and consolidated under a comprehensive anti-fraud program.
To be successful with an anti-fraud agenda, businesses must find the HA’s under their rocks early in their anti-fraud discovery process. Early intervention is critical as “after the fact” discovery derails projects just like what occurred here.
Defeat the “I own it” Mentality
When we conduct corporate risk assessments it is not uncommon to find silos (The “I own it” mentality) built around various departments.
But when we look in greater detail, what we usually see at most companies we’ve worked with are department owners who are not only operating in a siloed environment but who have built high walls, moats and drawbridges around their business units much like the fortified castles of Medieval Europe.
Again, silos reduce the efficiency of the overall anti-fraud strategy, decrease compliance, legal, and regulatory efforts, contributing to decreased profitability and ROI in the company.
Defeating individual, departmental and management silos requires a mindset shift from the prevalent “I own it” mentality to a “we all own it” mentality. The graphic above represents the kind of cross departmental cooperation necessary to effectively strategize about mitigating fraud and risk committed against the corporation.
Depending on your corporate structure, there may be other anti-fraud knights needed at your entities “roundtable” as well but the nice thing is that none of this is carved in concrete. It’s definitely a “salt to taste” environment where you can easily add key stakeholders as necessary.
Success in this area is driven by breaking down silos and fostering a “we all own it,” holistic mindset as indicated in the graphic.
The Bottom Line
There’s good news and bad news to this story. The bad news is that elves are apparently everywhere… they “allegedly” live under rocks in Iceland and, if the analogy to employee behavior is correct, they also exist in corporations across the globe where we’ve seen them disrupt and derail important anti-fraud projects much like the needed infrastructure project in Reykjavik.
The good news, however, is that through proper planning, effective strategy and clear lines of communication we can reduce the impact that elves have on our businesses and ensure that we’re fighting fraud effectively and collaboratively. This, of course, reduces fraud losses and increases the ROI.