Moral Disengagement in Organizations

In a recent interview with Barbara Walters of ABC News, Bernie Madoff didn’t have much concern for the victims of his massive fraud, though was deeply worried about the impact of his actions on his family. He said in the interview – “I understand why clients hate me. The gravy train is over. I can live with that.” He added -“The average person thinks I robbed widows and orphans. I made wealthy people wealthier.” Even after imprisonment, he is morally disengaged. He justifies that defrauding the wealthy is okay and not that big a crime.

How does a normally functioning human being become morally disengaged to an extent that all crimes done by him or her appear rational? The thinking is that the end justifies the means and criminal behavior is not a big deal. Let us explore the impact of moral disengagement on human behavior and its impact on organizations.

In the paper “Moral Disengagement In The Perpetration Of Inhumanities” the author Albert Bandura states – “Moral agency is manifested in both the power to refrain from behaving inhumanely and the proactive power to behave humanely. Moral agency is embedded in a broader socio-cognitive self theory encompassing self-organizing, proactive, self-reflective and self-regulatory mechanisms rooted in personal standards linked to self-sanctions.” Hence, the control for moral behavior rests with the individual. The negative self-sanctions for behavior that contravenes a person’s personal ethics and values stops them from behaving inhumanely. Even in situations when there is sufficient inducement or anticipated reward for doing so.

However, if the self-sanctions are missing or a person does not feel self-condemnation for inhumane behavior towards others, the person will willingly participate in inhumane activities. To ignore self-sanctions, a person gives himself/ herself a moral justification for the inhumane act. They tell the story to themselves that they are acting as moral agents to protect some higher goal by harming others. This is evident in case of riots and religious wars in society. To establish supremacy of their religion or race, they justify harm to people of other race and/ or religion.

In organizational context, it is evident when one victim is bullied by a group of employees for belonging to a certain race, religion, gender, sexuality etc. In such cases, inhumane behavior becomes socially acceptable.

Moreover, besides the aspect on which a person has justified inhumane behavior, a person can still be morally engaged in other aspects. Mr. Bandura states – “Selective activation and disengagement of personal control permits different types of conduct by persons with the same moral standards under different circumstances.” Madoff’s thought process exemplifies it. He is concerned on the suffering of his family members but not of his victims.

Additionally, people are mostly unaware of the changes in their thought pattern and behavior. They start with mild aggression or a small crime and these pricks their conscience. However, gradually they get used to doing inappropriate things and harming others without any self-criticism or loss of self- esteem. The ruthlessness increases and with it the atrocities on the victims. Once this sets in, it is difficult for them to stop without some external intervention as morally they have justified their acts.

The question remains – how are normal people motivated to do atrocities to others? Here are some ways mentioned in the research paper that people use to perpetuate inhumane behavior.

1.    Spreading tales

It is the communication skills of the charismatic leaders who are morally disengaged that influences public to compromise on moral behavior. Hitler’s speeches roused many to conduct the worst possible inhumane acts. Under normal circumstances, the same people may not have done any crime.

The story used can influence many. For example, in the corporate world rumors are spread about employees who maybe on the verge of finding senior management involvement in frauds. The unethical team to damage the reputation of ethics officers and risk managers does a defamation campaign. The facts get buried under the false story and rumors. The ethics officers are portrayed as liars.

2.    Use of twisted logic

Under normal circumstances, a person is unlikely to indulge in inhumane acts towards others especially in public view. Besides self-condemnation, the person will be scared of society’s judgment and boycott. However, to influence a group to conduct a crime, one can give the logic that achieving the goal through legal means is not possible. This logic is used in investigations, where suspects basic human rights are contravened by the police on the pretext that suspect will not disclose the truth on verbal interrogation.

In the corporate world, corruption and bribery are prime examples of it. Many a times organizations consider corruption is justified for conducting business and earn profits even if it means risking lives. As seen in the Common Wealth Games fraud, a bridge collapsed. A few passerby’s died and some were injured. Reason being the material used by the construction company was sub-quality.

Organizations also pay bribes and grease payments using the same logic. According to them, the work or project will get delayed if the organization obtains the required permissions through proper channels. A few organizations in India are also known to threaten physical harm to government officers and their own employees to get their work done and avoid legal channels. Justification is, why bother with legal contracts or proper means. Here the end justifies the means.

3.    Using historical incidents

The saying goes- you are not guilty unless you are caught. This logic is used frequently for influencing people to use inhumane methods to achieve goals. If in a previous situation, illegal means were used to achieve a goal, and the team was successful, the same methods will be used again.

In such situations, the assessment of the situation is biased and the conflicting realities of the situation are ignored. The domino effect of a crime conducted repeatedly in an open social environment is huge, and prone to miscalculations. However, in such situations the sociological impact and the gravity of the situation are misinterpreted.

In corporate world, this occurs when deviant organization culture sets in. For example, X person has conducted a crime and Y is innocent. However, X is not punished and Y is punished. This gives encouragement to wrong doers that they will get away with criminal behavior and the victim will face the brunt of it. If this management laxity continues, slowly more and more staff will turn towards criminal activities. In the long run, the staff will start showing criminal behavior towards the management itself. Hence, the management gets trapped in its own negligence.

4.    Displacing responsibility

The reasoning given by perpetrators of inhumane behavior is- “I am not responsible for it, the senior sanctioned it, and I am just following orders.”  In such situations, the group members will not take responsibility for their inhumane and detrimental behavior towards others as long as some authority figure takes ownership for it. The members will ignore the suffering and harm caused by them to the victim.

Bandura states- “the greater the legitimacy and closeness of the authority issuing injurious commands, the higher the level of obedient aggression. The sanctioning of harmful conduct in everyday life differs in two important ways from the direct authorizing system examined by Milligram. Responsibility is rarely assumed that openly. Only obtuse authorities would leave themselves accusable of authorizing harmful acts. They usually invite and support harmful conduct in insidious ways for personal and social reasons. Through surreptitious sanctioning practices they can shield themselves from social condemnation should the courses of action go awry. They also have to live with themselves. Sanctioning by indirection enables them to protect against loss of self-respect for authorizing human cruelty.”

 Hence, in such situations the victim suffers while the authority figure is removed from direct contact. Therefore, the authority figure doesn’t suffer from self-recriminations for sanctioning humane cruelty and the members who execute the cruel behavior displace their responsibility to the authority figure. This generally takes place in the corporate world when authority figures sanction serial bullying or stalking of a victim to achieve personal goals.

5.    Defusing responsibility

When a number of people are involved in a crime, then no one person takes responsibility for the crime. Each person is doing one small negative act on the victim and the cumulative total impact of the negative actions is nobody’s responsibility. This is primarily illustrated by the cyber bullying that has become prevalent in the present world. Last year a couple of school kids committed suicide due to cyber bullying.

Secondly, diffusion of responsibility is easier on internet as it allows anonymous ids and one can attack the victim through these anonymous ids. Since the real individuals behind the attack cannot be easily identified, they are emboldened to degrade the victim. They may not make the same statements on the victims face since then it amounts to publicly accepting perpetuating heinous crimes.

In organizations when an employee is mobbed the responsibility is diffused since each employee is doing one small act. If the mobbing continues for a long time, then most participants get immune to their own negative actions, suffer no guilt or remorse and consider it an operational function. The activities get routine and their morality is not questioned. Under group responsibility, people are crueller, sometimes competition sets in as to who can be more cruel and none of the members hold themselves personally accountable for their actions.

6.    Disregard or distortion of consequences

If you hear any abuser, be it a perpetrator of domestic violence or anything else, the victim is said to be weak. In cases of psychological abuse and torture, disregarding consequences of one’s behavior becomes easier. The perpetrator states the victim is – making it all up, is attention seeking, a crybaby, can’t deal with the adult world, psychologically weak, can’t deal with pain etc. To distort the consequences of their own actions, abusers give these excuses.

This way they minimize the impact of their own actions so that they don’t have to feel guilty. If minimization doesn’t work, then stories are told to discredit the victim’s pain and suffering. It is easier to harm when the injuries are not visibly evident that is why psychological abuse is so prevalent.

In organizations, as per report 50% of the staff experiences bullying and 5-10% are so deeply impacted that some commit suicide and some never go back to work again.

This can become a wider problem as seen in the financial crises and mortgage foreclosure problems in US. The bankers discarded the fact that due to their negligence a number of their customers had become homeless due to no fault of theirs. Even in the financial crises, bankers failed to acknowledge that their high-risk taking resulted in the crises. The financial crises resulted in job losses of thousands but the perpetrators didn’t consider themselves guilty. On the other hand, a few rewarded themselves with big bonuses.

7.    Dehumanization

The last and the worst method to use are to dehumanize the victim. It is difficult to mistreat friends, neighbors and colleagues, as one knows them. There will be some level of self- reproach and condemnation. However, it is easier to mistreat a stranger since an unknown person doesn’t generate an empathetic response.

Therefore, it is easier to brutalize people when they are viewed as sub-human forms and are degraded completely. If a person is disposed of their humanness, and equated to an animal, then self-censure doesn’t get activated. Hence, the aggression is escalated and continues unabated.

In corporate world, this occurs in autocratic and bureaucratic organizations where the power holders or senior management considers their juniors as less than human. They believe that juniors are there to obey orders and do as they are told. The juniors have no personal desires, life and rights. In such situations, people with authority use coercive power since they cannot be held accountable. As Gareth Morgan in his book “Images of an Organization’ says- that some organizations have a worse culture than Soviet KGB.

To illustrate, Maruti is facing a labor strike, though previously it was known as an employee friendly organization. One of key complaints of workers is that they get just 30 minutes for lunch and two breaks of 7 minutes each for tea/coffee. They are complaining that in an 8-hour shift they sometimes don’t have the time to use the washroom also. Maruti management brought in the changes to increase production of cars at the existing facility.

Conclusion

Bandura says that – “Justified abuse can have more devastating human consequences than acknowledged cruelty. Mistreatment that is not clothed in righteousness makes the perpetrator rather than the victim blameworthy. But when victims are convincingly blamed for their plight, they may eventually come to believe the degrading characterizations of themselves” This is horrifying and unless the victim has a high self-esteem, s/he might believe that they deserve to be treated in a sub-human manner.

Risk managers and ethics officers can find themselves as victims as they fight for what is right and just. They are sometimes punished for their convictions and principles by management. Some bend under the social pressure and some deal with the conflict.

However, viewing it from different lenses, moral disengagement is a huge problem for the corporate world. Self-sanctions and individual moral control appears to be the strongest restrainers for inhumane acts. Hence, we must remember C. P. Snow words when obeying orders –

More hideous crimes have been committed in the name of obedience than in the name of rebellion.”

References:

  1. Bernie Madoff ‘Can Live With’ Fraud Victims’ Anger, But Not Family Scorn, He Tells Barbara Walters Exclusively

2.  Moral Disengagement In The Perpetration Of Inhumanities by Albert Bandura, Stanford University


Auditors and Accountants – Humor

The weekend is starting and here are some jokes that I found on auditors and accountants. Hope you enjoy them.

1.  What did the auditor say at the vampire stock take?  Count Dracula

2.   Did you hear about the cannibal Audit practice? They charge an arm and a leg.

3.  What do cannibal auditors do after their Office Christmas Dinner ? Toast their clients

4.   If an accountant’s wife cannot sleep, what does she say? “Darling, could you tell me about your work”

5.  A guy in a bar leans over to the guy next to him and says, “Want to hear an accountant joke?” The guy next to him replies, “Well, before you tell that joke, you should know that I m 6 feet tall, 200 pounds, and I m an accountant. And the guy sitting next to me is 6 2″ tall, 225 pounds, and he’s an accountant. Now, do you still want to tell that joke?” The first guy says, “No, I don’t want to have to explain it two times.

6.  A patient was at her doctor’s office after undergoing a complete physical exam. The doctor said, “I have some very grave news for you. You only have six months to live.” The patient asked, “Oh doctor, what should I do?” The doctor replied, “Marry an accountant.” “Will that make me live longer?” asked the patient. “No,” said the doctor, “but it will SEEM longer.”

7.    A young accountant spends a week at his new office with the retiring accountant he is replacing. Each and every morning as the more experienced accountant begins the day, he opens his desk drawer, takes out a worn envelope, removes a yellowing sheet of paper, reads it, nods his head, looks around the room with renewed vigor, returns the envelope to the drawer, and then begins his day’s work. After he retires, the new accountant can hardly wait to read for himself the message contained in the envelope in the drawer, particularly since he feels so inadequate in replacing the far wiser and more highly esteemed accountant. Surely, he thinks to himself, it must contain the great secret to his success, a wondrous treasure of inspiration and motivation. His fingers tremble anxiously as he removes the mysterious envelope from the drawer and reads the following message: “Debits in the column towards the file cabinet. Credits in the column toward the window.”

Have a great weekend and hope it refreshes you for Monday’s work and meetings. 🙂

References:

1. The Alternative Accountant.

2.  Funny Jokes

Industrial Espionage in India

In 2011, with the disclosure of 2G Telecom Scam and associated Niira Radia taped conversation, the Indian corporate world was jolted out of deep sleep. For the first time industrial espionage risks were evident to boards and senior management. A survey of KPMG indicated that 14% of the Indian companies were targets of corporate spying. The perpetrators generally target IT systems to obtain business critical information. Sometimes competitors resort to unethical practices to get competitive advantage. Sometimes, unknown external people attempt to sell the information to a bidder.

The idea of quick money makes many rationalize the white-collar crime. Even novices get hare-brained ideas of blackmailing senior management. Organizations protect themselves using the following strategies:

1.    Evidence against spies and blackmailers

The success of most crimes rests on perpetrators identity being undisclosed. Their criminal activities are untraceable. Novices however, do not have the fundamentals of criminal activity. They come on the forefront and show their own hand. That moment, their game is over. An organization can issue a legal notice to them or file a criminal case against the culprits.

2.    Too big for their boots

In India, logic is seldom used for participating in criminal activity. Sometimes, serial bullies with no work get together to find soft targets. They believe victims will part with money and property to have the pleasure of their company. The basic question arises- why will the victim not file a legal police complaint against them? Optimism quite frequently leads to delusion. No strategy, no resources and with just a capacity to be abusive, isn’t the best method to initiate a white-collar crime. However, one cannot have an argument with ignorant people.

3.    Finding moles

One of the common ways for perpetuating industrial espionage is of finding moles within the organization or ex-employees who are disgruntled. The belief is that they will be able to get information. This strategy works when competitors attempt it, as competitors provide protection and backing to the moles. However, a bunch of novices can’t be successful using this strategy since, data theft in India attracts criminal punishment up to 2-3 years. A regular employee knows the law and will not assist some small group in illegal activities.

Closing thoughts

Greed takes over people when it appears that there is some quick money to be made. However, before rationalizing the crime the consequences of the actions are not considered.

Organizations however need to be careful when dealing with such situations. Ensuring business sensitive information is protected and not available with third parties is critical to shield themselves.

References: 

Global Post – Industrial espionage booming in corporate India

Business Ethics from Zoroastrianism

“Good thoughts, good words, good deeds” is the mantra of Zoroastrianism. It is one of the ancient religions, as old as Hinduism or maybe older. Before Christ, it was the main religion of Persia, though now the numbers have dwindled. I am reading the English translation of old Zoroastrian prayers and am impressed by the insight given about ethical conduct. According to me, the same principles are still applicable in the business environment.

1.      Bases of Ethics

The very essence of Zoroastrianism is captured in the Vispa Humata prayer mentioned in Khordeh Avesta:

All good thoughts, good words and good deeds are produced with (good) intelligence. All evil thoughts, evil words and evil deeds are not produced with good intelligence. All good thoughts, good words and good deeds lead the doer to heaven. All evil thoughts, evil words and evil deeds lead him to hell. The result of all good thoughts, good words and good deeds is heaven. Thus it is manifest to the righteous person.”

Doesn’t the above paragraph form the baseline of business ethics? A person with good intellect and integrity is far more valuable to an organization than a genius lacking ethics. Right attitude and behavior are essential traits in the corporate world.

2.      Battle of Ethics

Interestingly enough, the Zoroastrian religion is based on the battle between God and Satan.

“God, the creator of the world, Ahura Mazda, is all good and no evil originates from him. Satan Angra Mainvu is the source of all evil in the world. Ahura Mazda stands for truth and order whereas Angra Mainvu creates falsehood and disorder. The battle between good and evil will continue until the end of the world. At the end, God will be victorious.”

Corporate world faces an ongoing battle between constructive people and destructive people within the organization. Management identifies and defeats saboteurs to mitigate various risks. Sometimes the battle is small; sometimes it becomes a full-scale war at global level. The good leaders become knights in corporate war zone.

3.      Medium of Ethics  

Fire and water reflect duality and are considered incompatible, as fire cannot sustain in water. However, in Zoroastrianism both are agents of purification.

“In Zoroastrian cosmogony, water and fire are respectively the second and last primordial elements to have been created, and scripture considers fire to have its origin in the waters. Both water and fire are considered life-sustaining, and both water and fire are represented within the precinct of a fire temple. Zoroastrians usually pray in the presence of some form of fire (which can be considered evident in any source of light), and the culminating rite of the principle act of worship constitutes a “strengthening of the waters”. Fire is considered a medium through which spiritual insight and wisdom is gained, and water is considered the source of that wisdom”

Metaphorically speaking, in corporate world water represents business ethics and fire symbolizes fraud risk. Business ethics provide the guiding principles for building a healthy corporate culture and various frauds give insight on areas of weaknesses. The evidence in the investigation lays the ground for being victorious in an ethics battle. The lessons learnt from each fraud strengthens the organization culture.

Closing Thoughts

Ancient wisdom states fight the good battle to make the world a better place to live. Leave a legacy for which people will remember you forever and God will welcome you warmly. The sacrifices made now will give dividends later. So let us have the wisdom to learn from Zoroastrianism and do the right thing.

Shouldn’t this battle of ethics be fought in Indian corporate offices? What do you say?

References:

  1. Zoroastrianism
  2. Khordeh Avesta


Risk Disclosure at Board Level

Deloitte has just released a research paper  “CFO Insights:  Board relations: Have risk disclosure practices improved?” covering the risk disclosure practices of top 200 companies listed in S&P. The research is in continuation of 2010 study.  Securities and Exchange Commission (SEC) had issued instructions in Feb 2010 that companies must disclose the role of their board in risk oversight. The graph below depicts the results of the research.

Table from Deloitte Research Paper

To me the table indicates that US companies have focused on formation of risk management committees at board level. However, there is still a long way to go in respect of boards seriously considering risks. Reason for making this statement is that just 45% of the companies reported alignment of  risk oversight  with corporate strategy. Moreover, just 11%  of the companies report involvement of boards in monitoring risk appetite of the organization. Lastly, just 8% disclose involvement of board in formation of corporate culture. This indicates boards are still giving lip service to risk management and haven’t got down to the details of managing risks.

The paper gives four key recommendations for risk oversight committees.  I tend to agree with the recommendations, however in my view this is more of a Chief Risk Officer’s job and not Chief Financial Officer.

Revisit risk governance and oversight practices peri­odically to ensure they not only keep pace with, but actually anticipate, the risks your organization and your industry face.

• Keep development of the risk governance and manage­ment infrastructure on the leadership agenda and be sure that its development is funded appropriately.

• Monitor risk-related disclosures in the proxy statements of peers, competitors, and market leaders—and of customers and suppliers—and use their practices as benchmarks or goals.

• Ensure that your disclosures and other stakeholder com­munications tell the full story of your risk oversight and management efforts.

Closing thoughts

Risk oversight committees play a crucial role in managing risks of the organization. Therefore, keep the members abreast about various risks facing the organization. Risk oversight committees fail at doing their job effectively when they do not receive accurate information timely. The tone at the top established by risk oversight committee in respect to risk management will percolate downwards in the organization. Hence, inform and empower them, when required.

References:

Deloitte – CFO Insights:  Board relations: Have risk disclosure practices improved?

Fraud Symptom 11 – Deviant Fraud Risk Management Function

The biggest challenge an organization faces in respect to fraud, is when the fraud investigators turn deviant. It is a case of watchdogs turning rabid.  Generally, according to reports about 5% of the fraud investigators become fraudsters. As I have said previously, the only difference between a fraud investigator and fraudster is that of ethics. Both of them have equal knowledge and skills on modus operandi of frauds. In rare situations, the majority of the fraud department turns deviant. This is the worst-case scenario and the organization faces high risks if such a situation occurs.

In this post, I am discussing three situations – good, bad and ugly of fraud investigators turning deviant.  The battle between ethical fraud investigators and deviant fraud investigators is quite complex and definitely not available in the textbooks. To depict the various scenarios I am taking the example of a large multinational organization.

1.    The Good Situation

In organization ABC, the head of fraud risk reported to a senior executive X. The head of fraud risk was deviant; however, the second in charge was ethical. Now the head of fraud risk orchestrated a few frauds by attempting to show them as processing errors. However, senior executive X didn’t hold a high opinion of the head of fraud risk and confirmed information from the second in charge before taking any action. The second in charge had informal instructions to escalate matters to senior executive X if things started going wrong. In this situation, though deviant behavior existed but no harm was done to the organization. The senior management including the CEO controlled the deviant head of fraud risk.

2.    The Bad Situation

Continuing with the same example, senior executive X announced his retirement plans. During the same time, the global fraud office informed that two major frauds have occurred. The head of fraud risk deputed the second in charge to conduct investigations for both the cases. The second in charge chose to investigate the larger case first and travelled to the location. Meanwhile, the head of fraud risk went on a vacation. The junior was well versed with this behavior, because even previously whenever the head of fraud risk wished to create trouble, he did so and went on vacation. Hence, the second in charge was highly suspicious of the motives of the head of fraud risk.

While investigating the case, the second in charge realized that it was a fabricated case with no evidence available on the suspects identified by the global fraud office. The second in charge informally communicated to senior executive X on the dilemma of reporting. The senior executive X advised to do accurate reporting. Hence, the second in charge played a political card by issuing an interim report stating that no evidence is available locally and seeking global fraud office help in investigation. This caused political chaos in the organization as the report was circulated to the senior management. Moreover, the local head of fraud risk and second in charge were in the global offices at the same time. The second in charge was given a cold shoulder by the heads of global fraud office. This made the second in charge vary of the situation and somewhat suspicious.

Back at the local office, the second in charge investigated the second case, found evidence against the suspect and recommended to the senior management to lodge a police complaint. The senior executive X and other managers were in favor of filing the police case.

Meanwhile, a meeting was held amongst the senior management and decision taken to terminate the services of head of fraud risk. Now in this round the ethical fraud investigator won the battle, though after some losses to the organization.

3.    The Ugly Situation

One would assume that firing the head of fraud risk would solve the problems and things would improve. However, in such cases without addressing the challenges of the organization, the situation can become ugly. A change of a few key players can cause havoc to the organization.

To illustrate the point, the senior executive X succession transition took place. Senior executive Y was taking his place. Now for some rhyme or reason, which the second in charge couldn’t instantly fathom, senior executive Y took an instant dislike to the junior and was very friendly with the fired head of fraud risk. Senior executive Y didn’t want the police case filed and the second in charge was threatened with job loss if he proceeded with it.

However, as formally, the management had approved filing of police case, the second in charge followed formal instructions. During police interrogations, the suspect revealed that he was contacted by the global fraud office to do data theft. As usual, the head of fraud risk had again gone on vacation. Now the second in charge became very suspicious and thought that there were deviant fraud investigators in the global office too. The second in charge was now being politically isolated and constantly bullied.

Further,  the number of frauds increased and the similar type occurred repeatedly in the same location. This caused the second in charge to suspect senior executive Y’s role in them as in none of the cases there was any conclusive evidence available on the suspects identified by the global office.

The second in charge hoped that with the new head of fraud risk, things would improve. However, they deteriorated further as the new head was equally if not more deviant.

Meanwhile, senior executive Y had spread his network and established his power structure. Most of the staff was petrified of him and global fraud office supported him.

To add icing to the cake, the CEO changed. The old CEO did not brief the new CEO on the political events. The new CEO was clueless and senior executive Y took advantage of the situation.

The second in charge thought of a plan to connect the new CEO and brief him about the past events. However, senior executive Y understood the intentions of the second in charge. He discredited the second in charge, staged a ceremonial hanging and got him fired.

Now the senior executive Y had set the stage for creating a deviant organization culture, with no one having the guts to inform the new CEO on the various frauds occurring within the organization.

Recommendations

In any organization, things can really go bad if the fraud investigators and senior management who are in positions of most trust, start betraying it. Hence, in such situations timely and decisive action is required.

1)    If fraud investigators are suspected of unethical practices, terminate their services immediately. Don’t give those second chances or relocate them to another office. They will start the same behavior in another location, and then the disease will spread.

2)    In senior executives are suspected of orchestrating frauds, terminate them immediately. The financial, legal and reputation risks are highest when senior executives are involved in frauds.

3)    Clean up the whole system, and don’t address it by plugging one hole at the time. Undertake an evaluation of all fraud investigators of the department to check their ethics, behavior and other aspects. If suspected of deviant behaviors fire them. Establish new procedures and systems to monitor the new team.

4)    Senior managers must monitor fraud department regularly. They should do skip level meetings, keep communication channels open and ensure that the right action is taken on the fraud investigation reports.

To read more on Fraud Symptoms series, click here.