MENLO PARK, Calif.,
Jan. 14, 2016 /PRNewswire/ --
According to a new joint study issued by global consulting firm
Protiviti and the Economic Crime and Justice Studies Department at
Utica College, companies are not
well-positioned to prevent corporate fraud nor conduct
investigations, creating a significant potential liability to their
executives and shareholder value. These limitations, observed
across the majority of respondents, also lessen the likelihood that
those companies will receive full cooperation credit from the U.S.
Department of Justice when seeking to negotiate a settlement
stemming from a government investigation. The survey also found
that nearly half of the companies surveyed (48 percent) fail to
conduct a formal fraud risk assessment on at least an annual basis
and a troubling 27 percent have never implemented a formal fraud
risk assessment. Only a scant 6 percent of all respondents reported
a high level of confidence in their organization's vendor fraud and
corruption risk oversight.
The 2016 White Collar Crime and Fraud Risk Study
(www.protiviti.com/fraudsurvey) explores corporate crime and the
fraud risk management practices used to combat that crime, based on
a survey of more than 270 C-level executives, board members, audit
directors and risk managers from a cross-section of industries.
With the typical organization losing an estimated five percent of
its annual revenue to fraud, organizations cannot afford not to
take an urgent and strategic approach to fighting white collar
crime and fraud.
"Good governance is mission critical, particularly as the demand
from regulators and shareholders for more proactive fraud risk
management programs intensifies and executives are held
accountable," said Scott Moritz, a
Protiviti managing director and leader of the firm's investigations
and fraud risk management practice. "Despite the resource
constraints that many organizations face, it's essential, now more
than ever, that they do away with the outdated reactive measures
they have in place and embrace a proactive, preventative approach
to fraud risk management. We find that too many executives who have
a 'no fraud here' mentality learn the hard way that their company
has been a victim of white collar crime."
Challenges in Managing Fraud Risk
In response to the
question, 'Which of the following challenges does your organization
face in managing its fraud risk proactively?' survey participants
responded as follows:
There is limited
availability of internal resources to address fraud risk
|
47%
|
We lack proactive
fraud risk management - our focus is on incident response when
allegations arise
|
37%
|
We lack a unified
fraud risk management strategy
|
31%
|
Fraud and misconduct
is not considered a "high-risk" within the organization
|
29%
|
Proactive fraud risk
management is not a corporate priority
|
26%
|
We do not have a
member of senior management who is designated with ownership and
responsibility for fraud risk management
|
22%
|
There is inadequate
funding for anti-fraud program and initiatives
|
15%
|
Our organization has
a "no fraud here" mentality
|
13%
|
Laws and regulations
or cultural norms in our non-U.S. locations present unique
challenges that we have yet to address
|
11%
|
Who Owns Fraud Risk Management
Responsibility for
fraud risk management tends to fall to the CFO in most companies,
as the survey findings reveal based on the question:
'Who in the ranks of senior management is designated with
ownership and responsibility for fraud risk management in your
organization?'
Chief Financial
Officer (CFO)
|
18%
|
No senior management
professional is designated with ownership
|
14%
|
Chief Legal Officer
(CLO) or General Counsel
|
13%
|
Internal Audit
Director
|
13%
|
Chief Risk Officer
(CRO)
|
13%
|
Chief Executive
Officer (CEO)
|
10%
|
Chief Security
Officer (CSO)
|
2%
|
Other
|
12%
|
Don't know
|
5%
|
Combatting Fraud
While the majority of companies
conduct ethics and fraud awareness training, fewer than half
overall (46 percent) do so at the recommended frequency of at least
once annually, and more than half of all organizations lack a fraud
detection program (though the numbers are better for large
companies). Additionally, while most respondents indicated that
their company has a telephone hotline, website or electronic
mailbox for employees to report fraud, only 13 percent regularly
conduct surprise audits.
The survey also found that the most significant areas of concern
for organizations to address with regard to COSO Principle 8 were
"Safeguarding of assets" (22 percent) and "Management override of
controls" (20 percent). The updated 2013 COSO internal control
framework is the new governance standard for most publicly traded
companies – and a foundational element of Sarbanes-Oxley
compliance. It requires that companies consider the risk that
individuals or entities may act outside the organization's expected
standards of ethical conduct.
"Fraud detection techniques, such as having a code of conduct
set in place, employee background checks, awareness training,
third-party due diligence and surprise audits, are crucial in not
only detecting risk, but also proactively preparing for future
threats," said Donald Rebovich,
professor of criminal justice and executive director of the Center
for Identity Management and Information Protection at Utica College. "A program that engages all levels
and departments in prevention and detection is vital to a company's
financial health and reputation."
About the Survey
The Protiviti and Utica College 2016 White Collar Crime and Fraud
Risk Study was fielded in July
2015 across the globe; the majority of respondents were in
North America. Respondents work in
the public, private, government and non-profit sectors and are
representative of virtually all industry sectors.
The survey report, along with an infographic highlighting key
results, a podcast and a short video are available for
complimentary download at www.protiviti.com/fraudsurvey.
Webinar on January
27
Key findings from the survey will be discussed in
a complimentary webinar on January 27
at 9:00 a.m. PST. Protiviti's Moritz
and Utica College's Rebovich will be
joined by Peter Grupe, a Protiviti
director and the former head of the White Collar Crime branch of
the New York Field Office of the Federal Bureau of Investigation,
and Pamela Verick, a Protiviti
director and widely recognized subject-matter expert on fraud and
corruption risk. Guest speaker George
Stamboulidis, co-leader of law firm BakerHostetler's
national White Collar Defense and Corporate Investigations Practice
will add his insights during the 90-minute webinar. Please register
at www.protiviti.com/webinars.
About Protiviti
Protiviti (www.protiviti.com) is a
global consulting firm that helps companies solve problems in
finance, technology, operations, governance, risk and internal
audit, and has served more than 60 percent
of Fortune 1000® and 35 percent
of Fortune Global 500®companies.
Protiviti and its independently owned Member Firms serve clients
through a network of more than 70 locations in over 20 countries.
The firm also works with smaller, growing companies, including
those looking to go public, as well as with government
agencies.
Named to the 2015 Fortune 100 Best Companies to
Work For® list, Protiviti is a wholly owned
subsidiary of Robert Half (NYSE: RHI). Founded in
1948, Robert Half is a member of the S&P 500
index.
About Utica
College
Utica College,
founded in 1946, is a comprehensive private institution offering
bachelors, masters and doctoral degrees. The College, located in
upstate central New York,
approximately 90 miles west of Albany and 50 miles east of Syracuse,
currently enrolls approximately 4,500 students in 44 undergraduate
majors, 30 minors, 21 graduate programs and a number of
pre-professional and special programs.
Protiviti is not licensed or registered as a public
accounting firm and does not issue opinions on financial statements
or offer attestation services.
Editor's Note: Infographic (in JPEG and PDF) and photos
available upon request.
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SOURCE Protiviti