KnowledgeLeader Blog

Executives often cite an ability to adapt to change as the most important factor for success in today’s dynamic business environment; however, there is another equally important factor: an unwavering commitment to ethical and responsible business behavior. As many organizations already understand, a formal, written code of conduct is critical in order to transform ethical behavior into something more tangible for employees. Such a code is now a requirement for public companies, as mandated by the Sarbanes-Oxley Act and by the listing requirements of major stock exchanges.

Globalization, increased transparency of business activity, pervasive media coverage, and the growing complexity of business and business relationships have increased the ethics and compliance risks for organizations. There is greater likelihood of wrongdoing being exposed by the media, watchdog groups or government agencies or through a firm's internal systems. Illegal or unethical acts can be done intentionally by people of bad character or unintentionally by people who made decisions without full knowledge of what they were doing. The damage to a firm's reputation and the huge costs associated with fines and litigation can destroy a company. Therefore, managing for legal and ethical excellence has emerged as a critical as well as morally imperative function for all organizations.

Fraud is the intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. In the business community, the ultimate goal of fraud is to gain money. There are numerous frauds within the business world.

Fraud: Corporate fraud, employee theft, insurance scams/workers compensation fraud, employer fraud, forgery/falsified documents and even money laundering. Nobody likes to think it’s happening in their company, and yet global fraud studies by the Association of Certified Fraud Examiners (ACFE) estimate a median of 5% of revenue is lost every year due to fraud. While the ACFE found that both large and small organizations fall victim to occupational and workplace fraud, employee theft and financial fraud are especially detrimental to businesses with less than 100 employees.