In risk assessment, organizations also consider the threat of a theft or fraud when deciding on the funds devoted to security and controls, versus the ultimate benefit of safeguarding from loss. Unfortunately, however, many organizations tend to forego the cost of implementing adequate internal controls or safeguarding of assets due to an underestimation of the powerful force known as Pressure/Motive that occurs within fraud’s storm system.
As you read this, I know that you know of opportunities and valuables—within your organization, a friend’s business, your kid’s scout troop—that go unmonitored for years, solely based upon trust. Sally has been with the company from the start; Joe controls the Little League fund, but has also coached all six kids’ baseball teams through the years…I’d trust either of them with my life, right? Possibly…but sadly, I have also observed the otherwise-most-trustworthy of business associates or friends that have resorted to desperate measures under the unbearable weight of pressure in their lives. Whether perceived or real, when someone is under extreme stress and faced with impossible choices, perception becomes the reality. And I’m not referring to the stereotypical motivators, such as addictions or greed—I’m talking about life-changing events. Bill is going through a nasty child custody battle and may lose all rights to see his son grow up. Jane’s husband had a stroke and is without disability insurance as tuition comes due for their daughter’s next semester at college. A single mother and her child will be out on the street in one week if the back rent isn’t paid. In these situations, the individual believes he or she has truly run out of options, other than perhaps embezzlement.
So what’s the takeaway? It is the realization that things happen in life that we can’t control, so it is important to re-evaluate the sometimes-blind faith and carte blanche we give to those we trust with our valuables and livelihood. It’s also a good opportunity to reaffirm your organization’s open-door policy or perhaps institute a program for personnel who may be going through a difficult period. It’s not a sign of suspicion or lack of confidence in people; it’s a benefit to the organization and those that it entrusts, offering protection against potentially having pressure drive them to do things they’d never think possible, things they’ll soon regret.
Author: Richard C. Gordon, CPA/ABV/CFF, CFE, CGMA, Director of Forensic and Valuation Services