We provide here an overview or brief preview on one or two of the white papers, guides, products, and diagnostics produced by us or our partners.

Taming Corporate Frauds from the Root- a behavioral white paper produced by TotalPoise Associates

Corporate frauds and financial malpractices have become cankerworms globally. In the African region, where there is palpably inadequate statistical record, anectdotal reports indicate that a staggering amount of the equivalent of U.S. $1.75 million is lost yearly to corporate frauds, defined here as frauds committed against organizations. Such an amount may be peanuts when compared to large scale corporate frauds in more developed economies. But no organization can reach its potential or attain corporate excellence when paralyzed financially, and , particularly so, from within. There is an urgent and increasing need for organizations to address these financial behemoths from the root in order to enhance their level of financial fidelity and ensure long-term corporate success and sustainable high performance. What are organizations doing to enhance their level of financial fidelity or reduce financial infidelity? In view of the pervading cankerworm of corporate frauds at various levels globally it is apparent that financial behaviour in the corporate environment is largely a matter of an executive’s psychological make-up. Organizations can attain much mileage in enhancing the level of financial fidelity by a deliberate attempt on the part of corporate management to understand the critical elements underpinning corporate frauds and adopt key programmatic approaches to manage them. Here is a brief overview of some of the key behavioral-linked approaches to understanding and managing corporate frauds.

Behavioral Explanations

Current behavioral analyses point to a combination of personal, cultural, situational and experiential factors in the understanding and management of corporate frauds. Let us consider three of such. This brief is an excerpt from our white paper on: ‘Taming Corporate Frauds from the Root.’ The white paper addressed more than twenty behavioral approaches to understanding and managing corporate frauds.

1. Socio-cultural Factors:

Values make a social system tick. A breakdown in values is at the heart of lack of respect for the general good, which corporate frauds epitomize. The increasing wave of corporate frauds in the last 15 years is symptomatic of the discontinuity in the value system and ethical commitments of key corporate players -the shareholders, the management, the employees, the customers, and, if you like, the larger society. In most social circles, particularly in African and many third world societies, the acid test of a person’s worth is how liquid he or she is. How he or she gets the cash is a non-starter! Many employees, members of management, shareholders and customers program themselves to get rich quick, or to catch up with the Jones, in the instinctive fear that patient and honest efforts in the right direction may devastatingly impact on their instinctual drive for pleasure, self gratification and economic security; more so in societies with chronic lack of organized social security. A core corporate inference, with antidotal impact on corporate frauds, is the increasing need to create a socially responsible organizational life and a benign, ethical top-management leadership.

2. The Availability Syndrome:

Corporate frauds happen where the funds or resources are available! Corporate frauds take place where the conditions are conducive. Fraudsters tend to exploit the slightest opportunity to perpetrate corporate frauds if the time is ripe. Thus, fraudsters will wait, and even scheme, for the opportunity and for the right moment to act. Like a hot radiator that explodes at the careless handling by a motorist, fraudsters will lie low-perfecting their acts and biding their time where they know the funds or resources are abundant to snap-waiting for any carelessness or imperfection in the system. What conditions- what lapses, what facilities, what machinery- in your organization can potential fraudsters exploit? What surveillance, perhaps of an autopilot nature, is in place to outsmart insider-linked corporate frauds?

3. Innate Psychological Imbalance:

Innate psychological elements are often seen as important causes of corporate frauds. The psychologist, Sigmund Freud, and other Freudian theorists believe that human beings have the innate tendency to be antisocial (in this context, to commit corporate frauds) because of their uncontrollable instincts, called id impulses. Freudians see human personality as consisting three elements, which are: the id (the instinct), the ego (the reality gauge or rational centre), and the superego (the value judge or conscience). For Freudians, antisocial behaviour (in this context, corporate fraud) results from various dysfunctions of these psychological elements. Thus, a faulty ego, in which the individual has problem with learning from experience, handling frustration and insecurity, and inadequate perception of social reality, may predispose the person to such acts as corporate frauds. Where the person has an underdeveloped superego or conscience, he or she does not feel remorse for wrongdoing and, thus, may see corporate fraud as an organizational game. Such propositions as were made by Freudians, suggest, for example, the need for robust staff recruitment systems and the use of appropriate psychological and psychometric tests in performance management and taming corporate frauds.