| Economic crime has many aspects and encompasses bribery and
corruption, identity theft, cheque and credit card fraud, industrial
espionage, money laundering, VAT fraud, procurement fraud, cyber
crime and product counterfeiting.
Companies need good risk management and security systems to protect
themselves against such economic crime.
Economic Crime can damage:
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| Brand/Reputation
Shareholder equity value
Supplier relationships
Customer relationships |
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Case Study: Austrian, Not Australian
Wine
Austrian wine makers supplying the Japanese market enhanced
their products with die-ethylene glycol in order to provide
the sweetness that Japanese customers liked. When this came
to light, their sales nose-dived and took a very long time
to recover. Unfortunately Australian wine sales were also
affected, as many of the Japanese consumers could not readily
distinguish between Austrian and Australian on the labels. |
| Controls That Might Be Used |
Having policies in place which are known to all the staff provides
a framework for very sensitive situations.
| Disciplinary Procedures |
Companies should set out very clearly what action they will
take against economic crime. There should be no doubt in people’s
mind that they are serious. |
| Segregation of Activities |
This is a key control e.g., no one person should be able
to order, receive and sign a cheque for goods. |
| Whistle-blowing |
People fear their colleagues and the reaction of the
company if they indicate something is going wrong. A written
policy on this can support their action. Senior management
must be supportive, even when some of the suggestions are
false alarms. They, or external legal or audit advisers,
should be recipients of whistleblowers’ messages,
not the line managers. Police should be consulted to ensure
that correct and responsible action is taken.
Good risk management extends to all staff.
It includes being aware of any issues, including economic
crime, which could harm the company and the people who work
for it. Without a whistle-blowing policy and structure to
receive messages, people will be unlikely to come forward.
A policy acts as a catalyst, and as a deterrent. |
Remember, economic crime is not just opportunistic. Often organised
crime targets companies, especially those with weak systems and
two or three people will infiltrate the company and work to defraud
it. The impact can be devastating.
Many of the controls that are in place to help manage the business
can be used to prevent and detect economic crime.
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Which of the following controls
does your company use?
Click the boxes next to each
of the controls below to either tick, or clear
them. After you have ticked all controls that you
use, click the Advisor button and read the feedback.
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After considering the controls available to you next apply them
to the possible economic crime risks that your company could face.
As usual, it is your perceptions and understanding that create the
risk map.
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The Risk Evaluator below will
allow you to get a feel for what sort of economic crime
most concerns your company. Consider your most likely crime
risks from the list below and rate them for impact, probability
and controls in place.
Underneath each of the Impact, Probability
and Controls in Place columns there are a series
of square boxes. These are the gauges by which
you may assess the level of risk.
Click repeatedly on each gauge
to determine the levels of risk that apply to your business.
The lower the gauge is set (green), the less problematic
a risk is likely to be for you or the better controls you
have in place for it. The higher a gauge is set
(red), the worse the risk is liable to be for you.
Once all of the gauges have been set for the risks
that apply to your organisation, click
the Feedback button to read the summary feedback
for the risks you have nominated. You can also click on
the See Map button to view a Risk Map
based on your settings.
Try different gauge settings to see what impact
they have on the Feedback and Risk Map.
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The price of a crime free company is eternal vigilance. Never assume
that your systems are invulnerable. Regularly carry out a risk review
and get others to test your systems.
You have now reached the end of the Finance Module, like every module
in this series its purpose is to give you an indication of areas of
business to think about. |
