(Conclusion)
Educate your people about fraud; better yet educate them about integrity.
One way to pro-actively reduce fraud is to educate your employees about fraud and the red flags that they should look out for (e.g. drastic change in lifestyle that are inconsistent with earnings capacity, override of approval levels, etc.).
Consider implementing a mandatory fraud and ethics training for all employees (including members of management team) on fraud prevention and detection. Some of the salient points that the training should cover include your company’s code of conduct, policies and procedures; the employee’s role and responsibility to report violations of the code of conduct; and what actions or omissions are prohibited by law and disallowed by your company. All new employees must be required to undergo this training. This should not be a one-off activity. Follow it through by conducting a periodic confirmation of your employees’ understanding and continuing compliance with your company’s code of conduct.
Even more important is to educate your employees about integrity. Doing the right thing for the company in the end is good for all stakeholders. The company, like a family, is also a support system. Employees must realize that at the end of the day, the company benefits its members. As such, safeguarding its assets, preserving its reputation, making it more productive and profitable is the business of all concerned. The company should have positive reinforcement for those that act with integrity. It should put these employees as models for others to exemplify.
Communicate, communicate, and communicate
For an effective communication to occur, it must flow down, across and up in your organization. People must also retain and understand the purpose of that which is being communicated.
Does your employee know the objectives of his own activities and how his duties contribute to achieving your company’s objectives? Does your employee know his obligations concerning fraud and misconduct? How can you communicate these to your employees? Communication can take such forms as your policy manuals, accounting and financial reporting manuals and memoranda. Communication can be made electronically, verbally, or through the actions of management, formal and informal training sessions, meetings and on-the-job supervisions.
It is highly important that you communicate your view on fraud, the actions you will take to investigate fraud and the consequences of fraudulent acts.
Get your suppliers and customers in the bandwagon
Your suppliers and customers should also be made aware of the company’s ethical standards and expectations regarding their actions in dealing with the company. Areas applicable to them are: conflict of interest, confidentiality, gifts, entertainment and favors. These are vital not only for your existing suppliers and customers but also when new business relationships are being established or negotiated. You can require regular declarations from your suppliers and customers that they are aware of the requirements for ethical behavior in transacting with your company. You can also enjoin them to participate in your regular surveys to help you assess the state of ethical climate in your organization.
Some companies expressly prohibit suppliers and customers from offering gifts or other favors as this may influence their employees’ decision-making while others set nominal values for seasonal gifts that can be offered. You can adopt such policies on gifts and entertainment. More importantly, communicate these policies to your suppliers and customers so that they are guided in their dealings with the company.
Educating your suppliers on the consequences of unethical behavior is also important. Emphasize that you will not tolerate those who may be found guilty of violating your company’s ethical standards and expectations and that such violations can result to among others, contract termination, blacklisting of the supplier or taking possible legal actions against them.
Lead by example!
Finally, lead by example. Employees tend to do what their superiors do. This is commonly called the trickle-down effect of the “tone at the top” – the ethical atmosphere created in the workplace by the company’s leadership. Setting an inappropriate “tone at the top” drastically impacts behavior within the organization. If members of management are known to initiate gifting policies, independence, or simple things like reimbursements – then it makes your actions as management license for all others to follow.
If the tone you set promotes ethics and integrity, your employees will be more disposed to live those same values. However, if you appear unconcerned with ethics and focus mainly on your company’s operating results or convey a message of winning at any cost, your employees will have a tendency to do the same because they feel that ethical conduct is not of primary importance in your company. Putting undue pressure on your employees to meet unrealistic goals and targets creates more pressure and fear on the part of your employees to meet that goal, at any cost! Thus, you hear stories about employees manipulating records to make it appear that expectations are still being met.
What then is the key to influence your employees? Demonstrate your commitment to values and ethics both in words and in actions. It is critical not just to talk the talk but to act in a way that enforces the values and ethical standards of your organization. Send periodic communications to your employees praising progress and highlighting specific positive results. Reward your managers and employees who have demonstrated exemplary adherence to the company’s ethical and compliance policies and procedures. In the same vein, act upon poor behaviors openly and transparently. Offer your employees opportunities to make suggestions about the company’s existing ethics programs and acknowledge and reward good ideas.
The essence of setting the right tone at the top is for you to be personally committed, credible and willing to take actions on the values you promote. Talking about ethics to your employees will be useless if at the end of the day, they cannot see a demonstration of your commitment to honesty, integrity, reliability and fairness.
Remember, you have a critical influence on the behavior and culture of your company. If you don’t care, your staff won’t care also.
(Imelda Horario Corros is a Director for Advisory of Manabat Sanagustin & Co., CPAs, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity.
The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG in the Philippines.For comments or inquiries, please email manila@kpmg.com or icorros@kpmg.com)