International Fraud Awareness Week offers South Africans an opportunity to reflect on why the many measures taken to combat fraud simply don’t seem to be delivering results. The reason, argues Professor Deon Rossouw, CEO of the Ethics Institute of South Africa (EthicsSA), is that the remedies proposed typically fail to integrate ethics.
“Most fraud studies mention the failure of ethics in their analysis of the causes of fraud, which always seems to have risen since the last study, but they seldom include an ethical component in their proposed remedies,” he observes. “I wonder whether that’s not because these studies are generally conducted by accounting firms which—quite naturally—focus on the tools they have at their disposal, primarily hotlines, controls and policies. Don’t get me wrong: hotlines, controls and policies are absolutely vital, but they simply don’t deliver results unless they are supported by an ethical corporate culture.”
Only when a deep ethical culture has been created, and is self-sustaining, will employees and government officials do what is right irrespective of whether they are likely to be caught, or what their need might be. If ethical behaviour is imposed from above and compliance is solely based on fear, fraud will continue to grow because the factors that motivate it, a toxic mixture of greed and need, remain in place.
Professor Rossouw proposes three actions to strengthen programmes for reducing fraud in both the public and private sectors significantly. This is critically important given the huge impact that fraud, used in the broad sense to include bribery and corruption, is making on service delivery.
Provide training on corporate anti-fraud policies that includes an ethical dimension. It’s a shocking fact that only around 30 percent of C-suite executives and 50 percent of employees attend current training on governance policies, providing one clue as to why simply having the policies is not enough. Corporate leaders must set the tone by doing the training and insisting those who report to them take it too.
“And if the training has a proper ethical framework, we can start to change behaviour,” Professor Rossouw comments.
Ensure ongoing communication about fraud and honesty, again made within an ethical framework. Building an ethical culture will not be achieved in a day, and must be considered to be a journey. A well-crafted communications strategy can help keep the issues top of mind and reinforce the fact that compliance with corporate policies is not just a business need but a moral obligation.
Recognise and reward ethical behaviour. Companies and other organisations recognise financial performance, and thus they have successfully created a culture that promotes behaviour that improves profitability. Recognition and reward systems must be adapted to incentivise ethical behaviour.
These three actions are relatively simple to put into effect but they can be extremely effective because they harness the power of ethics to change the way that people behave—even when nobody is looking!
“Building an ethical culture is critically important because it helps us to go beyond detecting fraud to preventing it from happening in the first place,” Professor Rossouw says. “For fraud to happen, there needs to be opportunity, motivation and then the capability to rationalise the wrongdoing. Ethics helps to stop fraud from occurring by undercutting the motivation to commit it, and the individual’s ability to rationalise what he or she has done.”
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