Evaluating the Costs of Corporate Threats

Evaluating the Costs of Corporate Threats

Effects and Costs

Financial fraud and sabotage in a company has many far-reaching negative impacts that can lead to multiple long-term and short-term problems. Sabotage refers to malicious and deliberate actions by people intending to harm and weaken a unit through destruction, disruption and subversion. It also entails the intentional withdrawal of responsibility and efficiency in order to achieve a given self-centered goal (Petrucelli, 2012). On the other hand, financial fraud is a financial crime committed by an individual through manipulation and alteration of financial documents or financial transactions for the purpose of self-gain. Financial fraud is a crime that involves a violation of corporate law, and it is punishable by law. Sabotage and financial fraud can be done internally or through external influences. Internally organized actions amounting to fraud and sabotage are mainly coordinated and performed by employees of a company, entity, or organization. External influence is usually propagated by interested secondary parties such as competitors, financiers, and in some cases clients (Nixon, 2008). Irrespective of the means of crime, crimes propagated cause immense disruptions and losses for the company.

The impact and effects of sabotage and fraud are felt in all sectors and departments of an organization. The crimes negatively affect the success of the company as they lead to loss of profits, and revenue. Most crimes committed by individuals are propagated in order to earn financial gain. Culprits organize and implement mechanisms that drain money directly and indirectly from an organization. This, in turn, leads to the instability and financial shortage in the company. Business responsibilities, duties and operations are also negatively affected because of resource and financial shortage. On the other hand, the effects can lead to lack of funds to cater for salaries, debt repayment, supplies, contracts and shareholders. Future expansion and growth of an organization also depends heavily on the financial stability and proficient management of operations in all departments (Petrucelli, 2012). Failure to manage operations efficiently and the occurrence of fraud and sabotage can eventually lead to destruction and the collapse of an organization.

Financial fraud and sabotage in a company or organization can be either immense or minute. However, irrespective of the magnitude, affected parties lose trust or withdraw from the company. These crimes create a negative image for the affected organization and cause insecurities associated with future certainty, success, stability, performance and reliability. Financiers and investors of a company affected by sabotage and financial fraud tend to lose trust and confidence in the company. The presence of these problems exposes investors and financiers to major risks, such as, loss of money and bad debts (Barko, 2004). Moreover, potential financiers and investors interested in investing in the company fail to invest leading to additional problems for the organization. On the other hand, employees are negatively affected as they lose trust and confidence in the company. The employees feel insecure because of the risk of losing their jobs through impromptu retrenchment, or an entire collapse of the company.  This, in turn, can lead to early retirement and job changes by the employees and eventual loss of workers for the company. Sabotage and financial fraud should be avoided and controlled at all costs as they yield a chain of subsequent repercussions for the company.

Reasons

Sabotage and financial fraud in organizations has become exceedingly prevalent and common. There are many factors that determine, trigger and influence the occurrence of sabotage and financial fraud. Individuals committing these crimes can be internally based or outside based influences. Moreover, culprits of fraud can be from any level within  hierarchies of an organization. Research has shown  that most fraudulent acts are perpetrated by high officials (Barko, 2004). Factors influencing the occurrence of fraud and sabotage are determined by personality factors as well as the organization’s environment. Job satisfaction is a significant factor that is associated with fraud and sabotage. Unsatisfying occupations can be triggered by many factors, which include insufficient remuneration, stagnation, discrimination and favoritism. Poorly paid workers are unsatisfied, and this can result in malicious acts or direct theft of money. Employees implement ways of diverting and draining business revenue for their own personal gain. In addition, an organization that does not pay most of its employees well is at the risk of collaborative fraud and sabotage. This involves employees’ organized mass action to sabotage and steal from the company. Moreover, poor remuneration of employees provides a basis for justification. The employees justify their actions basing their argument on the fact that the company uses money meant for their remuneration.

Poor management and supervision is another factor that significantly contributes to the occurrence of sabotage and financial fraud. The success of an organization is highly dependent on the nature and productivity of the management team. Lenient management and insufficient supervision provides malicious people with the opportunity to engage in fraudulent activities (Nixon, 2008). Moreover, the employees are able to manipulate the system without attracting attention because of their familiarity with business operations. Poor management also fails to administer appropriate measures aimed at preventing, detecting and monitoring operations, responsibilities, crime and any inconsistency. On the other hand, incompetent leadership can be a result of malicious leaders who are directly responsible for crimes in the organization.

Technology advancement and changes in the nature and means of running operations in the corporate world have significantly increased corporate crimes such as sabotage and fraud. Data transfers have multiplied in most organizations because of expansion, growth and increased customer base (Miles, 2009). Moreover, formal communication, transactions and corporate interactions with suppliers, clients, financial institutions, and shareholders among other associates have increased. This has in turn led to increased sharing and transfer of information and vital corporate data. Leakage and infiltration of essential information in the wrong channels generate fraud, sabotage and theft in the company.

Prevention

Sabotage and fraud can be prevented and managed efficiently through improved management. Strategies, controls and techniques effective in curtailing and avoiding fraud should be implemented in internal and external operations. Fraud occurring because of employee dissatisfaction can be prevented through improved employer-employee relationships and increased employee satisfaction through monetary and non-monetary benefits. Moreover, supervision and management of employees should be improved to ensure that all inconsistencies and questionable operations are identified and controlled. In addition, an organization should implement supervision techniques that are superior to all employees (Hammer, 2003). Managers and high ranking employees are often not investigated leading to the ease of engaging in corporate crimes. On the other hand, information and business operations should be categorized appropriately so as to avoid disruptions, and diversion of information.

Data and information management should be well specialized and classified to ensure that information management is well stipulated. Information should be handled by  appointed personnel. A company should categorize information and ensure that certain information and documents, especially containing sensitive data should be handled by appointed people. This helps in the efficient management of information and control of data leakage. Information sabotage can be traced efficiently to the cause as persons responsible for data management are known (Miles, 2009). Sabotage and information leakage are less likely to occur in a well organized system than in an organization where company information is open to all employees.

Monitoring and control measures should be implemented in an organization at all levels. Employees and other authorized personnel should be provided with access codes for offices and computerized systems. This allows for efficient monitoring of movement, operations and transactions. Security codes should be computed and installed for financial systems and records where access should be given to selected people (Hammer, 2003). Good back-up systems should also be installed so as to ensure that inconsistencies and data alterations can be verified using archived information. Advanced technology has its advantages and disadvantages. Hacking and malware application are some of the significant flaws associated with digital and computerized systems. An organization should ensure it installs anti-malware and anti-hacking applications so as to control and manage fraud and sabotage cases. There are many ways in which sabotage and fraud can be prevented in a company. The success of these measures can be achieved through culture competence, good interpersonal communication, improved prevention and control measures, information safeguarding and appropriate supervision at all levels of operation.

 

References

Barko, C. D., & Nemati, H. R. (2004). Organizational data mining: Leveraging enterprise data resources for optimal performance. Hershey, Pa. [u.a.: Idea Group Publ.

Hammer, M., & Champy, J. (2003). Reengineering the corporation: A manifesto for business revolution. New York, NY: HarperBusin

Miles, R. E., & Snow, C. C. (2009). Organizational strategy, structure, and process. Stanford: Stanford University Press.

Nixon, W. B., & Kerr, K. M. (2008). Background screening and investigations: Managing hiring risk from the HR and security perspectives. Amsterdam: Butterworth-Heinemann.

Petrucelli, J. R. (2012). Detecting fraud in organizations: Techniques, tools, and resources. Hoboken, N.J: Wiley.

 

 

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