These scandals have included price fixing and collusive cartels in the construction industry, organised crime syndicate-driven cyber fraud activities in the financial services industry, abuse of public funds by corrupt senior managers and business partners diverting public and service delivery funding to personal coffers.
And while fraud risk management is traditionally seen as identifying assessment of fraud risk and implementing adequate controls, Goss believes that this is a short-sighted approach as to adequately address the real problem of fraud, it needs to be elevated to a governance dilemma.
"Many organisations regard corporate governance and fraud risk management as two different issues. However in reality it is in fact when governance goes wrong that fraud occurs. For this reason, as a firm, SizweNtsalubaGobodo has coined and advocates the concept of 'fraud risk governance' as a comprehensive model to effectively deterring fraud and corruption," he comments.
Goss explains that while the advent of King III has been structured to ensure good governance it needs to be complemented by fraud risk governance as a means of managing good governance. "Despite the serious risk that fraud presents to business, many organisations still do not have formal systems and procedures in place to prevent, detect and respond to fraud. While no system is completely foolproof, there are steps which can be taken to deter fraud.
"The general trend among organisations seems to be adopting a good governance framework based on King III, but there is little to no focus on fraud and corruption risk assessment as a governance imperative when managing business risk. In other words, while they may seem to be complying with the King III code, the material risks of fraud and corruption are not considered in enough depth during business risk assessments," he adds.
Despite fraud being prevalent across organisations of all sizes and in all sectors and locations, Goss says that certain business models will inevitably involve greater levels of fraud risk than others. "In high risk industries such as the construction and telecommunications industries, corporate governance measures must ensure that the risk of price fixing, collusive cartels and other systemic problems such as irregular use of facilitation agents to pay bribes are adequately controlled and remediated. Here the anti-corruption and fraud control environment should be adjusted to fit with the degree of risk exposure.
"While the public sector is often regarded as high risk when it comes to fraud and corruption, because it is law that these entities conduct fraud risk assessments, they are in fact streets ahead of the private sector where fraud risk governance is still largely regarded as merely a nice to have," he comments.
For Goss, risk management is an important element of corporate governance and every organisation should review their anti-corruption and fraud risk status and develop their counter measures. However, he cautions against merely adopting rhetoric in the approach through the ever-popular and commonly cited phrase 'setting the tone at the top'.
"Too many organisations refer to setting the correct tone at the top but unfortunately few actually live the tone at top. Here it is important for the organisation to collectively agree on exactly what this means and what the implications are. "In addition it is equally important that should fraud occur, executives strive to act promptly and robustly while at the same time communicating their actions in an effort to deter a possible re-occurrence. Ideally corruption and fraud should be made part of the organisational good governance language and should be included in the communication programme," he emphasises.
Goss explains that successful organisations are those that consider effective fraud risk governance efforts not merely as an additional cost impacting on the bottom line, but rather as a key driver and facilitator of organisational growth. "Leaders within these organisations do not see integrity coming at the cost of high performance. Instead they see it as increasing performance and profitability while at the same time reducing risk, thereby assisting the organisation to enhance competencies and maintain a critical business leading edge.
"Ultimately organisations that combine a culture of high integrity, and good governance together with competitive, high performance goals, will maintain a sustainable business model and a framework that is resilient to the financial and reputational set-backs that come with occasional incidences of fraud and corruption," he concludes.
