The stable door is still open!

We know from experience, write Nigel Iyer and Veronica Morino, that the true annual cost of fraud is enormous but mostly hidden, at least until the damage is done. Fraud threatens organisations, even whole economies – witness the current global financial crisis, which kicked off with the disclosure of massive mortgage fraud in the US. However, if most is not visible, we ought to ask the question: ‘Why do we spend such a disproportionate amount of time, money and effort on investigating after the event rather than on detection and prevention before the worst happens?’ This article explores more efficient and alternative approaches to managing fraud risk.

Veronica Morino (veronica.morino@septiagroup.com) has over the past ten years applied her academic training in sociology and science of the organisation to the field of fraud and corruption, first investigating many frauds and then focusing on prevention; she is working on measuring the resistance and resilience of organisations to fraud and corruption. Her book, “The Anatomy of Fraud and Corruption” (Morino, Minogue and Brytting) will be published in 2010.

When news of a serious fraud breaks, it tends to be treated like a mini-crisis; the saying “there’s no point shutting the stable door after the horse has bolted” summarises the mood. However, often the most important actions and messages should be about managing morale, the company culture and preventing further fallout. Pursuing one investigation to the detriment of everything else may be likened to all the grooms chasing after the one horse which has bolted, while ignoring the welfare of 99 others still in their stalls… and forgetting to shut the stable door!