At That Point
  • home
  • our story
  • our services
  • your resources
  • SA Industry News

Directors have key role to play in reducing fraud and corruption

7/4/2015

 
Picture
Based on recent research, Association of Certified Fraud Examiners (ACFE) estimates that the typical organisation loses 5 percent of its revenue to fraud each year. In South Africa, this equates to around R160 billion. The three main categories of fraud are asset theft, corruption and misstatement of financial statements.

“Corruption and other sorts of fraud are all different aspects of the same problem—the improper use of an official position for personal gain. The direct costs are very high, as these figures show, but when one takes into account the indirect costs such as reputational damage, investigation costs, loss of business opportunities and lost efficiencies, they are even higher,” says Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors in Southern Africa (IoDSA). “The best defence against fraud of all kinds is corporate governance that really works, and that is the responsibility of the directors.”

Principle 1.1 of King III states that the “board should provide effective leadership based on an ethical foundation” and Principle 2.1 that the “board should act as the focal point for and custodian of corporate governance”. 

Speaking at an IoDSA Corporate Governance Network (CGN)  event on the board’s role in combatting corruption, Chairman of the CGN and Director at PwC, Anton van Wyk reiterates that corporate governance is critical because it seeks to create a climate that is inhospitable to fraud of all types. “It’s important to acknowledge that these things feed off each other, making a company that acts corruptly more vulnerable to other sorts of fraud. For example, when employees see that the company is willing to act illegally by bribing officials, they can begin to feel it’s OK to steal equipment,” he says. “The ethics of the company have to be consistent and pervade every aspect of its business.” 

This is particularly important because many companies argue that they have to participate in corrupt activities in order to do business in certain countries. But the rot cannot be contained, and such companies soon find themselves suffering from other types of fraud and also potentially losing business as their reputations are tarnished. 

For that reason, one of the most important contributions that directors can make is setting the right “tone at the top”, showing in the way they conduct board meetings, and the way in which they reward or censure the executive team, that the corporate leaders stand for ethical behaviour. This is the first step in actively managing the organisation’s ethics as required by King III. 

This active management means that boards have to ensure that the right structures are in place to combat fraud and corruption, and that they know who the company’s customers and suppliers are—as well as how the industry operates. Such knowledge will help boards not only understand the risks the company faces but also what is average in terms of performance. The board is then in a much better position to spot tell-tale signs of fraud or corruption. Signs might be a higher-than-average propensity to win government tenders, or a lower margin than comparable companies. 

“There’s no fixed checklist of things that directors should look out for, but the better informed they are, the more likely they are to understand what the red flags are,” says van Wyk. “But the best defence, in the end, is a clear and widely accepted moral or ethical corporate identity.”

ENDS
​

MEDIA CONTACT: Cathlen Fourie, 012 664 2833, [email protected]

For more information on the IoDSA please visit:
Website:  www.iodsa.co.za
Twitter:  @The_IoDSA
LinkedIn: The Institute of Directors in Southern Africa group   

    Welcome to the IoDSA Newsroom.
    IN THE MEDIA

    2023
    ​

    2 March
    Financial Mail: 5572bb70-29ab-48f8-b5df-79c7bb7f27dc.pdfIN 


    Archives

    May 2025
    February 2025
    November 2024
    August 2024
    July 2024
    March 2024
    January 2024
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    April 2021
    February 2021
    November 2020
    October 2020
    September 2020
    August 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    May 2019
    April 2019
    February 2019
    January 2019
    November 2018
    September 2018
    August 2018
    July 2018
    February 2018
    January 2018
    December 2017
    July 2017
    June 2017
    April 2017
    November 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    November 2015
    September 2015
    August 2015
    July 2015
    June 2015
    April 2015
    March 2015
    February 2015
    October 2014
    September 2014
    August 2014

    Categories

    All
    702 Sun International CEO SleepOut™
    ABSA
    Accountability
    ACGN
    Advocate Fay Mukaddam
    Africa
    African Governance Showcase
    AGM
    Alex Granger
    Angela Cherrington
    Angela Oosthuizen
    Ansie Ramahlo
    Ansie Ramalho
    Audit Committees
    Auditor General
    Board
    Board Meeting
    Boards
    Budget
    Business
    CD(SA)
    Central Energy Fund
    CEO
    CEO Tenure
    Certified Director
    Chairman
    Chartered Director
    CIPC
    City Of Johannesburg
    Clover
    Companies Act
    COO
    Corporate Governance
    Corruption
    Cricket SA
    Delinquent Directors
    Director
    Directors
    Directors' Sentiment Index Report
    Disclosure
    Discrimination
    Dudu Myeni
    Economic Growth
    Eskom
    Eskom Board
    Ethics
    Executive Pay
    EY
    Fair Pay
    FEDSAS
    Fraud And Corruption
    Governance
    Governing Bodies
    Gupta
    Huge Group
    Institute Of Directors In South Africa
    Integrated Reporting
    IoDSA
    Johannesburg Property Company
    Karin Ireton
    King Code Of Corporate Governance
    King IV
    KingIV
    King IV Launch Conference
    Leadership
    Local Elections
    Management
    Mervyn King
    Mid-term Budget 2021
    Mini-budget 2021
    Municipalities
    Non-Executive Directors’ Fees Guide
    North West Cricket
    Parmi Natesan
    Politics
    Professionalising Directorship
    Property
    Public Sector Boards
    Ray Harraway
    Remuneration
    Remuneration Committee Forum
    Richard Foster
    SAA
    SABC
    SA Express
    SAPO
    School Governing Bodies (SGB)
    Service Delivery
    Shareholders
    Sikkie Kajee
    SME Growth
    Social Inequality
    SOEs
    South African Airlines
    South African Airways
    South African Forestry Company
    Stakeholders
    State Capture
    State-owned Enterprises
    State-owned Entities
    Succession Planning
    Sustainability
    Sustainable Development Forum
    The Ethics Institute
    The Institute Of Directors South Africa
    Transnet
    Trends
    Tsakani Maluleke
    UCT
    Vikeshni Vandayar
    Women
    Women's Day
    Zondo Commission

    RSS Feed

CONTACT US

office [at] atthatpoint [dot] co [dot] za
© COPYRIGHT 2025
ALL RIGHTS RESERVED
  • home
  • our story
  • our services
  • your resources
  • SA Industry News