As CFO for his $3 billion company, David has a lot on his plate. Rapid growth, thin controls in new overseas markets, monthly and quarterly reporting deadlines, and overseeing a staff of over 75. Fact is he just never gets time to actively address fraud risks. He knows he should. But so far his efforts have been limited to keeping his fingers crossed and hoping for the best.
I’ve been showing clients how to initiate, lead and sustain effective Anti-Fraud Campaigns for over 25 years. Unfortunately, for most organizations it takes a direct hit like David’s to force them into action.
But why should that be? Isn’t Fraud Risk Management just part of larger Business Risk Management ongoing efforts?
Quite simply the answer is yes. But there is a definite pattern of reasons and excuses about why organizations – especially large organizations – don’t take effective action to manage their fraud risks before they are victimized.
How many times have we all heard that a journey of a thousand miles begins with a single step? Pretty basic stuff. Unless you don’t know which direction to take that first step. North? South? East? West? Or something angled in between. Get the first steps wrong and you are headed way off in the wrong direction five steps later. And every subsequent step takes you even further from your intended goal.
The Anti-Fraud Tips in these blogs tell you pretty much every step to take. You’ll get the road-map to point you in the right direction from day one. Follow these ideas, and ‘uncertainty’ as an excuse for inaction evaporates, allowing confidence from taking proven actions to quickly fill in the void.
Following these ideas on your own may be all you need to get the job done over time. But an experienced guide can accelerate you progress on the anti-fraud trail. Just ask for help from someone who has walked this path too many times to count.
We’ve seen dozens of corporate Anti-Fraud Campaigns start with a bang and then quickly fade away to a fizzle.
Why? Simple: inadequate leadership support.
Fighting fraud is a Campaign, not an Event. To work, it requires the visible, vocal support of senior managers over an extended period until it sticks and becomes how we do business at every level. It’s not the flavor of the day, to be pushed aside as other important issues need more immediate attention. It requires a sustained effort until fighting fraud becomes part of the reflex ‘muscle-memory’ of every employee.
Removing and replacing habits takes time. Investment in leadership time and other resources must be secured right from the start. And that leadership starts with the Chief Executive Officer. No one else can make it happen.
After all, isn’t the CEO the de facto Chief Risk Officer regardless of whether someone else may have that title on their business card? Shouldn’t the CEO lead the charge against fraud? You know the answer, and so does your CEO.
Many leaders in organizations both large and small have the same flawed belief: we don’t have much fraud and the cost of managing the little bit we have isn’t justified. In short, the ROI – Return in Investment – doesn’t justify the effort.
Yet when I ask them to quantify just how much fraud, misconduct, theft and other wrongdoing they experienced in the last 12 months, with only three exceptions in over 25 years they have no idea.
Enter the Association of Certified Fraud Examiners (www.ACFE.com). Their “2014 Report to the Nations on Occupational Fraud and Abuse” states that “the typical organization loses 5% of revenues each year to fraud.”
5 percent of revenues? I don’t buy it and never have. It’s just too big to be reality.
But in my own work with clients, I’ve never seen less than 1 percent in larger organizations. 1 percent of $3 billion for David in our example above would still be $30 million. His team just discovered a multimillion dollar case. I bet he’s wondering where the rest is hidden? (And if he’s not, he should be!)
In large organizations, you’ll never cut your losses from misconduct and fraud down to zero, so don’t make that you goal. But try this idea on for size.
Assume it’s 1 percent of your revenue. Could you cut that in half in 18 months? The answer is a resounding yes.
For David, those savings would be a minimum of $15 million added directly to his bottom line through better ‘fraud expense control’. And I’m confident of results two to three times that based on my past experience.
How’s that for ROI, CFO’s?
Exactly how do you do it? By following the ideas in these 40 Fraud Prevention Tips. You’ll need to stay tuned for more of the details – or reach out right now and we’ll get you started on your own Anti-Fraud Campaign today.
How many of these and other excuses blocking serious anti-fraud efforts do you face in your business or clients? Unfortunately every organization has them, and they won’t go away on their own. Right now is the time to fight through these barriers – these excuses for inaction – and get the job done.
We can help. Just say the word and we’ll get started together.
John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”