DEALING WITH WHITE COLLAR CRIME

RISK ASSESSMENTS

INTRODUCTION

Every organisation should have arrangements in place for the recognition of the symptoms of White Collar Crime, even where no prior suspicion or evidence of it exists. This is firmly a management responsibility. Although they have an extremely important role to play, organisations should guard against failing into the trap of leaving this entire function to internal auditors. In this respect it is worth keeping in mind the fact that the auditing process detects only a very small percentage of white collar crime (current statistics are 2-3%).

 One of the most common methodologies to assess the possible risk to an organisation from white collar crime is a Risk Assessment. A Risk Assessment is a method of balancing security controls against the possible loss that could occur in any organisation. There are many variants of risk assessment systems and processes. Indeed, the subject would require a book of its own. It is our intention in this section to concentrate on one or two methodologies which can be utilised by organisations of all sizes.

RISK ASSESSMENT BASICS

Some of the key elements in any risk assessment methodology is that it must be:

• capable of being consistently applied across the organisation's operations;
• capable of providing a risk rating for each type of fraud;
• amenable to fine tuning;
• capable of being replicated;
• able to look at risks as if there were no controls in place; and
• able to measure the effectiveness of existing controls.

It is recognised that it is easier to measure inherent risks than to determine the effectiveness of controls. The latter requires not only a detailed understanding of the controls, their strengths and weaknesses, but also a factual assessment of how these controls are applied. This can only be done by those with a detailed understanding of the operations of the organisation.

CRITERIA FOR MEASURING RISK

It is obviously impossible to set down a definitive list of factors for assessing the risk of white-collar crime in organisation. However, the following factors are usually present:

• the rand quantum of the operations;
• recognition of white collar crime aspects other than money (time, information, threat to safety, insider trading, conflict of interest, etc);
• recognition of vulnerability to other serious criminal activities, like the abuse of influence, corruption, secret commissions and dishonest advantage;
• tapping in on the management perspective;
• past history of white collar crime in the organisation;
• results of internal and external audits on the organisation.

Annexure A reflects a more comprehensive list of criteria adapted from the Australian Law Enforcement Board's publication "Best Practice for Fraud Control".

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