{"id":900,"date":"2018-07-12T10:09:09","date_gmt":"2018-07-12T14:09:09","guid":{"rendered":"http:\/\/bringingfreudtofraud.com\/?p=900"},"modified":"2018-07-12T10:09:09","modified_gmt":"2018-07-12T14:09:09","slug":"using-metrics-to-improve-anti-fraud-performance","status":"publish","type":"post","link":"https:\/\/bringingfreudtofraud.com\/?p=900","title":{"rendered":"USING METRICS TO IMPROVE ANTI-FRAUD PERFORMANCE"},"content":{"rendered":"

(By Dr. Joseph W. Koletar<\/a>, CFE,
\nFounding Partner, Behavioral Forensics Group, LLC)<\/p>\n

The use of metrics in anti-fraud activities is as old as the profession itself, yet fraud persists in forms great and small. It is an endeavor which will never achieve a 100 percent success rate any more than law enforcement will prevent most of the population from speeding.<\/p>\n

But, as with law enforcement, the pursuit of improvement is a never-ending requirement. It may be that a degree of improvement can be gained by studying the techniques used by a highly-successful private-equity fund.<\/p>\n

An article in the Wall Street Journal<\/em> of July 10, 2018 (p. 1) may be instructive:<\/p>\n

\u201cSecret Formula, Intelligence Tests Fuel Buyout Firm.\u201d
\n(Robert Smith\u2019s method for revamping software companies relies on 110 directives)<\/p>\n

The article recounts Mr. Smith\u2019s secrets are, indeed, secret \u2013 they are stored on a well-protected company server and are used to evaluate and\/or modify the processes of an acquired company. Such companies must have CFS (critical factors for success) and tests to evaluate existing and new employees for various mental and psychological traits. Existing employees fear such processes but new employees embrace them, since they may be identified as HPLEs (high performing entry-level.)<\/p>\n

Mr. Smith is quoted as saying \u201cSoftware companies taste like chicken\u2026They\u2019re selling different products but 80% of what they do is pretty much the same.\u201d In short, Mr. Smith is looking at the \u201cguts\u201d of a company to see how well they perform. It must be working: The article indicates that four of his funds have returned annualized returns of between 11.7 and 29.2 percent. The article recounts that Vista<\/em> (the name of his company) has done over 300 deals and informs investors it has never lost money on any of them. (Note \u2013 the article is quite long and there are those in the financial services industry who disagree with Mr. Smith\u2019s approach.)<\/p>\n

Now the key question \u2013 what does this have to do with fraud?<\/p>\n

The very nature of a forensic inquiry into an organization \u2013 be it public, private, governmental, or Not-For-Profit \u2013 focuses on the \u201cguts:\u201d the control systems, the management style, reporting relationships, compensation plans, etc. In short, what keeps the organization moving. Fraud occurs when one or more of these elements becomes distorted. Examples:<\/p>\n

\u2022 A focus on profit or compensation promotes over-rides of controls.<\/p>\n

\u2022 Control systems have eroded and those who work in them are often seen as obstacles to success.<\/p>\n

\u2022 Star performers are rarely monitored as closely as they should be.<\/p>\n

\u2022 Psychological testing at any level, to include the \u201cC\u201d suite, is practically unheard of.<\/p>\n

\u2022 Accounting standards allow aberrations to be reported as \u201cnot material\u201d in financial reports.<\/p>\n

\u2022 The entire industry sector operates on a \u201chigh risk\u201d basis.<\/p>\n

\u2022 Internal audit staffs are over-worked, under-paid, and often seen as a necessary evil. They must also service an annual \u201cAudit Plan\u201d which allows them little time to explore anomalies in record systems, and most have little or no training in forensic inquiries.<\/p>\n

Many of these fraud-friendly issues can be disclosed with the proper use of metrics in fraud investigations<\/em>.<\/p>\n

If compliance monitoring (fraud deterrence) is to improve perhaps we should consider the \u201cRobert Smith\u201d approach.<\/p>\n

\u00a9 2018
\nJoseph W. Koletar<\/p>\n

BEHAVIORAL FORENSICS GROUPTM<\/sup> LLC<\/strong><\/p>\n

\u00a0<\/strong><\/p>\n

The\u00a0Behavioral Forensics GroupTM<\/sup> LLC<\/em>\u00a0is a team of professionals with vast experience in detecting fraud, understanding why it occurs, and in recommending steps to mitigate fraud incidence within the corporate workplace, particularly within higher-level (and therefore more costly to the enterprise) executives.\u00a0\u00a0Three members are co-authors of The A.B.C.s of Behavioral Forensics <\/em>(Wiley), a seminal work in the topic. The fields of investigation, organizational psychiatry, accounting and behavioral forensics, and law enforcement are represented within the\u00a0Behavioral Forensics GroupTM<\/sup> LLC<\/em>.\u00a0\u00a0Acting in synergy to help organizations prevent, find, and\/or reduce fraud, B4GTM<\/sup> is a premier, pioneering practice in this field.<\/p>\n

We are blogging at:\u00a0http:\/\/www.bringingfreudtofraud.com<\/em><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

(By Dr. Joseph W. Koletar, CFE, Founding Partner, Behavioral Forensics Group, LLC) The use of metrics in anti-fraud activities is as old as the profession itself, yet fraud persists in forms great and small. It is an endeavor which will never achieve a 100 percent success rate any more than law enforcement will prevent most … Continue reading USING METRICS TO IMPROVE ANTI-FRAUD PERFORMANCE<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-900","post","type-post","status-publish","format-standard","hentry","category-audit"],"_links":{"self":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/900","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=900"}],"version-history":[{"count":2,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/900\/revisions"}],"predecessor-version":[{"id":903,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=\/wp\/v2\/posts\/900\/revisions\/903"}],"wp:attachment":[{"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=900"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=900"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bringingfreudtofraud.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=900"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}