Small businesses need to encapsulate their values and standards of behaviour within enforceable policies, and implement their own interventionist solutions where necessary to create the right culture.
Your staff tends to take their cue from what management does more than what it says. Given this, companies that encourage questionable workplace practices from top to bottom can end up being their own worst enemies. By encouraging employees to take shortcuts or by demonstrating a lack of oversight, businesses can become victims and, sometimes, unwitting perpetrators of internal fraud, bribery and corruption. It pays to remember, building the right culture is key to growth and success.
The larger the company, the more likely there’ll be measures in place to detect these threats. For SMEs, it can be difficult to prevent the corporate culture from going south.
Small businesses can be dangerously exposed to bad behaviour by management, dishonest business practices by staff, suppliers and potentially, other key stakeholders. These incidents may not make the news but they can cripple the business.
It varies significantly between industries. Australian organisations can, however, lose up to 5% of annual revenues from fraud alone, according to the Association of Certified Fraud Examiners (ACFE) Global Fraud Study 2016. For many SMEs, that could represent an entire year’s profit.
Smaller businesses need to encapsulate their values and standards of behaviour within enforceable policies, and implement their own interventionist solutions where necessary. Remember, no amount of legislation can regulate an organisation’s culture. So, the onus is squarely on business owners and managers to lead by example.
It’s hard to change your culture, but it is possible.
The first step is to know the current business culture now and envision how you want it to be. Determine the changes leaders like you and other managers need to make to become role models whom the staff can look up to.
Empowering employees to question and speak out about improper conduct is key. So make sure to have clear incident reporting lines in place. You need to ensure employees who witness improper behaviour, whether it’s from managerial staff or otherwise, have the means to report it. The right culture means making it clear that employees will not be punished for speaking out against improper behaviour, regardless of who the perpetrator is.
Of course, the right culture alone won’t defend your business from individuals going rogue. You also need to develop a more prescriptive set of processes to both prevent and detect breaches. These processes need to be documented and shared with employees regularly. Include a mechanism for oversight so employees know they can’t get away with doing the wrong thing.
Examples of forensic or fraud detection procedures at the highest level include interviewing executives, conducting forensic due diligence background checks, understanding the systems-access profile of executives and performing forensic IT analysis as required.
An effective fraud and corruption control framework should encompass everyone in the organisation from workers on the factory floor to the management team and business owner.
It’s important for businesses to implement necessary checks and balances to mitigate risks, while reassuring stakeholders, including shareholders, that your trusted executives continue to act ethically and with integrity all the time.
Roger Darvall-Stevens, National Head of Fraud & Forensic Services, RSM Australia
