Forensic technology for compliance and fraud risks

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In today’s modern business, companies face the harsh reality of becoming the target of complex and sophisticated fraud, with even insiders or employees being the perpetrators. They also have to gear up to being party to human resource-related investigations, e.g., sexual harassment of employees. In such situations, it is important that companies have an organized, advanced and integrated approach to face such challenges, with the total involvement of their top management right down to the bottom layer of executives.

In this environment, the role of General Counsels (GCs) is not only restricted to being legal advisors, but also trusted business advisors. They help companies assess their risks and build compliance into their overall strategies. While dealing with incidents of fraud, the role played by GCs is even more pivotal. They need to be aware of the latest technology trends and anti-fraud mechanisms and should have in place effective strategic plans that include clear guidelines on how to respond and act when fraud or other incidents such as data breaches and sexual harassment allegations are made.

Need of the hour is to use forensic technology tools to manage compliance and mitigate fraud risks

  1. Preparing the groundwork: Companies should begin their groundwork by evaluating their existing compliance and governance policies. They need to update these to suit their operating environment and put in place robust frameworks to identify potential violations. A regular periodic assessment to check whether policies and systems are updated is also necessary.
  2. Utilizing the framework: Once the framework is in place, it can be used to identify anomalies that may indicate potential violation of compliance or fraud. Quick-hit projects may take four to six weeks, while program and integration can take one to two years or more.
  3. Optimizing the framework: integrate advanced forensic technologies: Organizations need to move beyond rule-based spreadsheets and database applications, and seriously look at using structured and unstructured data sources that consider the use of data visualization, text-mining and statistical analysis tools. In cases where anomalies are detected, specialized computer forensic tools can be used to discover evidence of wrongdoing or the complicity of suspected individuals.
  4. Setting the tone at the top:  It is imperative to involve a multidisciplinary team, including IT professionals, business users (end users of analytics) and functional specialists (those involved in designing analytics and day-to-day operations of programs) in this process. Communication across multiple departments and keeping key stakeholders updated on the progress under a defined governance program is a key success factor.
  5. Providing sustainable mechanisms: Keeping analytics simple and intuitive, and investing in automation and not manual “refresher” initiatives can make efforts much more sustainable. Investing in acquiring and developing professionals with the right skill-sets is imperative for organizations to sustain and leverage such mechanisms and provide benefits over the long term.