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Is Corruption The Coronavirus Of The Business World?

Tying The Tourniquet

American medical experts estimate that for every confirmed case of COVID-19, there could be as many as between five and 10 undetected cases. This is a virus that’s hiding in plain sight.

Since we first became aware of its existence in China in December 2019, Coronavirus has swept with frightening speed across the globe. Latest figures show upwards of a million infections and tens of thousands of deaths worldwide.

The Chinese government was caught completely off guard. Despite knowing the risks – China has a history of outbreaks of zoonotic viruses (those which start in animals then jump to humans) – they chose to ignore or discount them.

To compound the problem, the COVID-19 strain of Coronavirus has a 14-day incubation period. By the time the first cases were detected, untold damage had already been done. Within days, the virus had reached Europe and the UK, and within weeks, it had spread to Africa, the US and beyond.

After months of severe and widespread quarantine measures, China appears to have finally slowed the spread of the disease. To “flatten the curve” as the experts like to say. But it still rages on in the rest of the world, and is likely to do so for some months to come.

It’s an enemy we can’t see and have little idea how to fight. It lurks, invisible, in people’s lungs and nasal passages; on their clothes and shoes, and even in their hair. It taunts us, even as it hides in plain sight.

Corruption is a lot like this.

As Stealthy As A Virus, And Just As Devastating

At the 9th Annual Conference: International Forum on Business Ethical Conduct held in November 2018, OECD secretary-general Angel Gurria said: “Corruption remains one of the most pressing challenges of our time. It promotes mistrust in governments, public institutions, banks, corporations, politicians, political parties, democracies, you name it. It corrodes our social fabric.”

This is the thing about corruption: We know it’s there!

Companies know there is always the potential for fraud or financial misconduct within their ranks, and yet they choose to ignore the threat. Then they jump like scalded cats when the proverbial hits the fan!

Think about the stock count that somehow always balances despite there being known issues. Or the HR department that never performs background checks on potential employees or checks the legitimacy of their CVs. Why? Because they “know” only honest people want to join their organisation. Think about the policies and procedures that are only subject to a cursory review once every few years, or the auditing firm that conducts its audits quickly and cheaply because they’ve been auditing you for years and “know” your business and staff.

The list goes on.

The Problem With “It Won’t Happened To Me”

We were all so caught up in blaming “distasteful” cultural practices in China for giving rise to COVID-19 that we remained arrogantly oblivious to the growing threat to our own countries. In the same way, we love to sit in our ivory towers and point fingers at other companies, while remaining strangely reluctant to acknowledge our own risk and vulnerability.

And yet we’re surprisingly quick to act with shock and horror when suddenly we too fall victim to the effects of fraud and corruption. It is at this point we discover all our lip service and sanctimonious denial will do nothing to save us. Just as the Coronavirus is killing tens of thousands of people across the world, fraud and financial crime can kill businesses with frightening speed. Some may recover from the financial hit, but it is often the reputational damage to the brand as a whole that sounds the final death knell.

We Need To See, So That We Then Can’t Un-See

Mary Breslin is the President and Founder of Verracy, a company specialising in internal audit transformations, operational and financial auditing, fraud auditing and investigations, and corporate accounting.

She recently wrote an excellent article about how we simply don’t notice fraud until it’s pointed out to us, after which we can’t “un-see” it. You can read the whole article here, but essentially, these are the main take outs:

  • We spend a lot of time and effort looking for concealment efforts, but what about the frauds that aren’t actually concealed? The ones that hide, virus style, in plain sight?
  • The purpose of a reconciliation – anything from payroll to physical inventories – is to identify variances, determine the root cause, correct it and then prevent it from happening again going forward. But what happens when the issue can’t be identified and resolved? Normally, an adjustment is made to the account. How many times does an abnormal activity have to be experienced for it to be considered a normal activity? Surprisingly few. Very quickly, that normalised behaviour provides the perfect cover for wrongdoing.
  • Most reviews and controls look good on paper but don’t actually do anything. Over time, when people realise their work isn’t being reviewed, they get lazy and errors can occur. Ultimately, it can lead to the opportunity for fraud.
  • Fraudsters love these environments of semi-controlled chaos. We need to be doing more to look for them and shut down their opportunities.

It’s a great article, and one that highlights the very real need to us to be ever more vigilant in weeding out the corrupt in our organisations. We can’t afford to wait for a cough to become a pandemic. We must act now to stop the spread and flatten the corruption curve.

Do you need another set of eyes to look at your business and help you see what you are missing?

Let us help you assess the potential risk so that you have clarity on where your stand and how to implement security measures. If you are interested in an assessment, please contact me immediately.

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Please take care, and look after yourself and your loved ones.