Fraud and corrupt practices are increasingly affecting organisations globally, both in the public and private sector. How exactly is fraud and corruption defined?
Consider this definition by the World Bank
Fraudulent practice: A fraudulent practice is any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.
Corrupt practice: A corrupt practice is the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party.
In May this year, the media reported that City of Joburg Mayor Herman Mashaba, launched a fraud and corruption investigation that led to his office uncovering R10bn that the City had lost due to this unethical behavior.
Private companies may not have the budget to launch a similar thorough investigation, they may not even have billions of worth of Rands that vanish without an obvious trace to uncover. However, the private sector is just as affected. It is estimated that each year the typical organisation can lose an average of up to 5% of its annual revenue to fraudulent behavior! The impact of fraud is severe, it can lead to redundancies, fines (resulting from regulatory breaches), reputational fallout, legal ramifications and can hinder the overall potential development of services that are offered by an organisation.
How then, can those who are charged with overseeing the ‘cleanliness’ of the business identify and mitigate fraud and corruption risks?
The CIMA CGMA report identifies four key components of which an effective strategy in addressing fraud and corruption is made of, namely: Prevention, Detection, Response, and Deterrence.
“All of these aspects need constant communication and revisiting. Risks are ongoing and ever-changing, made more complex with advances in technology, and the number of relationships within the supply chain.”, states the report.
The latest risk is in Cyber-attacks, which are becoming the new normal with a greater chance of organisations becoming victims. Business Email Compromise (BEC) is a growing trend of email scam targeting businesses that work with suppliers who perform wire transfer payments. A particular form of BEC is “executive impersonation” which consists of sending fraudulent information online.
In the fight against fraud and corruption, principle 10 of the United Nations Global Compact (UNGC) relates to anti-corruption and calls on “business to work against corruption in all its forms, including extortion and bribery.”
Issued by Greysun Media on behalf of CIMA.