Fraud in the workplace: Prevention or cure?
Low levels of trust in UK organisations combined with close attention to expenditure are failing to prevent fraud in the workplace.

www.consultant-news.com  21.11.2008

As a result, the Chartered Management Institute has published Workplace Fraud: The enemy within – a new guide aimed at helping employers combat corruption.

The guide is being published against a backdrop of figures highlighting the problems and disquiet in UK organisations:

- 30 per cent admit they need to improve cash flow management
- 9 out of 10 individuals believe their boss doesn’t trust them
- just 8 per cent claim they have ‘sign off’ responsibility at work
- 35 per cent believe ‘managing costs’ is the biggest challenge they face
- 48 per cent of organisations report being victims of fraud.

Focusing on the triggers for fraud, the Guide urges UK organisations to focus on 3 key issues as part of a fraud management strategy. It argues that a working environment with few internal controls, unclear reporting structures and the existence of a ‘blame culture’ all create the opportunity for fraud to take place. However, the Guide also encourages employers to recognise that fraud is not just opportunistic, showing that motivation for dishonesty is often rooted in the pressure caused by unrealistic targets or financial problems.

“Fraud can be stopped in the early stages if robust detection procedures are in place,” says Petra Wilton, director of policy and research at the Chartered Management Institute. “However, rather than focus on the checks and balances that they introduce, employers need to highlight the impact that fraud can have on individuals and the business. Failure to do so means that organisations run the risk of stifling employees if they believe they are being watched by ‘Big Brother’.”

The guide provides a number of best practice principles for deterring and detecting fraud. These include:

- developing a fraud strategy statement: outlining what behaviour is and is not acceptable

- establishing an audit committee: to design fraud prevention measures and investigate allegations of malpractice

- making use of technology: to share information across the organisation in an effort to cross reference information and spot fraud more easily

- developing a culture where fraud is unacceptable: ensuring that from the top-down key messages are communicated and employees are made aware of reporting routes if they suspect a problem.

Gillian Lees, risk and governance specialist at the Chartered Institute of Management Accountants (CIMA), said: "Fraud is a major risk so organisations need to ensure that they have a robust fraud policy that is disseminated effectively and taken seriously throughout the organisation. We therefore welcomes this guide from the CMI as an excellent gateway to the subject. CIMA's forthcoming report on Fraud Risk Management, due out next month, will provide further good practice and practical ways to help organisations promote awareness of fraud prevention, detection and response in the workplace."