Part of any leadership role is assessment and prevention of risks, among which fraud and cyber threats are the most pervasive. A growing concern for organizations of all sizes and purposes, fraud can be of several types – of which, identity fraud and occupational fraud are more frequent and common.
According to data released by the Association of Certified Fraud Examiners (ACFE Report to the Nations on Occupational Fraud and Abuse), the majority of occupational fraud in the U.S. is perpetrated by employees of the organization, at a median loss of around $145,000 – $150,000, and in some cases, even millions. In most of the cases, the accused has been a first-time perpetrator and the employee rank, anywhere from a CEO to an accounting executive.
Proactive anti-fraud measures are an integral part of most organizations, but preventing executive frauds is connected not only to policies, penalties, high-performance analytics, artificial intelligence (AI), and other technological advancements. In the fight against fraud, it is strategic leadership that encourages a more unified approach, and better equips the management to combat the growing complexity and diversity of fraudulent activities, thus reducing an organization’s vulnerability to such risks.
“Strong leadership is an organization’s top priority in preventing the risk of fraud.”
Most organizations that have incurred large-scale financial and reputational damage because of frauds, have struggled with various risk assessment issues, and also have had a lack of unified thinking and decision-making, which in turn accelerated other factors. So while, knowing “how things are done” is something a leader may be well-versed at, it isn’t always indicative of a person’s ability to maneuver through more strategic requirements like detecting a scam or tackling financial crises.
Effective risk management isn’t always easy. It involves strategic thinking, open-mindedness, and the willingness to learn, even on the part of those at the top levels. As such, transformational leadership is not only responsible for fostering a cohesive and inclusive work culture or maintaining strong internal controls but, also for shaping an ethical mindset that can transform people’s attitudes, raise awareness and motivate employees.
At the same time, it can connect siloes, inspire more authentic and honest behavior among employees and management, and align organizational goals and company values with the larger message of ethical principles and integrity. The fight against fraud requires a comprehensive approach where multiple channels need to be engaged. From having an enterprise-wide analytics culture to layered security measures to real-time decision making, the way leaders understand and analyze the situations and opportunities that give rise to such incidents also facilitates its prevention strategy.
“The idea is to observe, notice, ask, and act.”
Corporate leadership has always been a challenging and stimulating role that has to withstand its pressures and overwhelming levels of expectation. Yet, navigating through challenges is what makes a leader resilient and successful. Undeniably, understanding and preventing fraud is associated with variables beyond leadership style alone, yet the influence of leaders on intention and behavior makes it a crucial link in correlating data, investigative expertise, and analytical talent.
Companies need to be watchful as well as willing to support open-minded collaboration by having a strong support system that fundamentally encourages one to:
- Stay open to ideas and new learnings.
- Ask questions, even the seemingly difficult or uncomfortable ones.
- Build a stronger appreciation and motivation for employees.
- Empower higher levels of commitment, trust, and identification with larger common goals,
and hence, creates a more robust and accurate framework for reducing current losses, detecting and deterring anomalies, and lessening the risk of financial manipulation. In integrating advanced analytics, one also has to be mindful to step up the internal dynamics of the organization. In wanting to deploy the best solution for effectively safeguarding your business, it is necessary to transcend limiting thoughts and develop a holistic integration of institutional controls, people’s mindset, and technology.