Facilitated by Goldengate Consulting

Facilitated by Goldengate Consulting
September 2012

Governance, Ethics, Risk and Fraud
Introduction

To understand how to manage risks in our businesses
Objectives Governance, Ethics, Risk and Fraud Objectives To understand the concepts of corporate governance, ethics, risk and fraud To appreciate the need for corporate governance and an ethical culture within an organisation To understand how to manage risks in our businesses

Definitions The Key Concepts
Governance, Ethics, Risk and Fraud Definitions The Key Concepts Governance is the system of controlling and directing an entity Ethics is a set of principles of right conduct or a system of moral principles Risk is the effect of uncertainty on objectives Fraud is a deception deliberately practiced to secure an unlawful or unfair gain

Corporate Governance

Definition What is Corporate Governance?
‘Corporate Governance is a system by which a company is directed and controlled’. – Sir Adrian Cadbury

Corporate Governance Issues
Understanding corporate governance issues Rights and equitable treatment of stakeholders Role and responsibilities of the board Integrity and ethical behaviour Disclosure and transparency

Strengthens confidence in management
Corporate Governance Corporate Governance Need for CG The need for corporate governance Transparency Strengthens confidence in management A form of protection for shareholders Good corporate governance encourages growth and sustainability for SMMEs

Corporate Governance Corporate Governance Key Principles
Accountability Responsibility Honesty and Transparency Integrity Openness Mutual respect Performance Evaluation Commitment

King III- scope & application
King III – Scope and Application Corporate Governance King III King III- scope & application Applies to all entities Apply or Explain Impact on Board – effective leadership

Stakeholders in an organisation
Stakeholder Relationships Corporate Governance Legislative Framework Stakeholders in an organisation Conflict of interests

Board – effective leadership
Corporate Governance Ethical Leadership & Corporate Citizenship Board/ Directors – Focal Point & Custodian of CG Effective & Independent Audit Committee Governance of Risk King III Governance of IT Compliance with Laws, Rules, Codes & Standards Effective Risk Based Internal Audit Governing Stakeholder Relationships Integrated Reporting & Disclosure

Conflict of interests Financial Reporting and Auditing
Corporate Governance Financial Reporting and Auditing Directors’ Remuneration Board – Stakeholder Relations Corporate governance & Risk Management Communication framework

Conflict of interests Corporate Governance “What makes corporate governance necessary? Put simply, the interests of those who have effective control over a firm can differ from the interests of those who supply the firm with external finance. The problem commonly referred to as a principal- agent problem, grows out of the separation of ownership and control and of corporate outsiders and insiders. In the absence of the protections that good governance supplies, asymmetries of information and difficulties of monitoring results in capital providers who lack control over the corporation, finding it risky and costly to protect themselves from the opportunistic behaviour of managers and controlling shareholders.” (OECD)

Approaches to corporate governance
The shareholder value approach The stakeholder/ pluralist approach The enlightened shareholder approach

Best approach to corporate governance
In your view, which approach is the best approach to corporate governance?

Corporate Governance Framework
Source: Wikipedia

Environmental Reporting
Integrated Sustainability Reporting Corporate Governance Economic Reporting Social Reporting TRIPLE BOTTOM LINE Environmental Reporting

Ethics

Ethics Ethics What is Ethics?

Basic ethics concepts and distinctions
Ethics is a set of principles of right conduct or a system of moral principles

What does ‘ethics’ mean to you??
Basic ethics concepts and distinctions Ethics What does ‘ethics’ mean to you?? I am an ethical person/ I am not an ethical person I work for an ethical organisation/ I do not work for an ethical organisation I live in an ethical country/ I do not live in an ethical country

Good Myself Others

What is business ethics?
Basic ethics concepts and distinctions Ethics What is business ethics? Business ethics can be defined as the principles, norms and standards that guide an organisation’s conduct of its activities, internal relations and interactions with external stakeholders

What are values? Personal Values
Basic ethics concepts and distinctions Ethics What are values? Personal Values Personal values are your own convictions as a person about what is good, acceptable and desirable. Your values are your core values as an individual

Personal Values Basic ethics concepts and distinctions
Assuming that you enter into a retail shop to buy a few groceries for the week. You pay for the items at the till, and you leave the retail shop. However, as you are about to enter into your car at the parking lot, you checked the change the till attendant gave you, and you realise you have been given thirty rand (R30) more than you are entitled to. What will you do?

Values in Organisations
Basic ethics concepts and distinctions Ethics Values in Organisations Strategic values Work values Ethical values

What is the difference between ethics and law?
Basic ethics concepts and distinctions Ethics Ethics & Law What is the difference between ethics and law?

Personal & Organisational Ethics
Basic ethics concepts and distinctions Ethics Personal & Organisational Ethics The good apple vs The bad apple

Personal & Organisational Values
Basic ethics concepts and distinctions Ethics Personal & Organisational Values Child labour may sometimes be justified If you could save a life by telling a lie, you should do so People who kill others for a cell phone should forfeit their moral right to life Smoking is not good

Professional Ethics A profession is a typical example of a group of people who adhere to a set of ethical standards. A virtue is a trait that intuitively enables one to do what is right. Professional virtues are those character traits which members of a profession are expected to have , for example, virtues of an auditor are independence, integrity and objectivity Professional Virtues

Ethics is the cornerstone of corporate governance
Importance of Ethics to the Organisation Ethics Importance Importance of Ethics Ethics is the cornerstone of corporate governance Ethics ensures the sustainability of a business Good corporate reputation is built on a solid foundation of ethical culture

Importance of Ethics to the Organisation
A culture of trust must be built on a corporate framework of ethical principles which are transparency/ openness, competence, integrity and benevolence Ethics play a major role in the prevention of fraud. Fraud prevention becomes a shared responsibility among the members of the organisation

Ethics – Driver for Corporate Governance
Ethics & Corporate Governance Ethics Ethics – Driver for Corporate Governance Fairness Accountability Transparency Responsibility

Ethics & Corporate Governance
Ethics of Governance Inclusive Approach Exclusive Approach

It enhances economic performance It helps build an ethical culture
Ethics & Corporate Governance Ethics Code of Ethics - Benefits It enhances economic performance It helps build an ethical culture Stakeholders know where they stand (the contents of the code set clear parameters of desirable or undesirable behaviour)

It provides security and predictability for employees
Ethics & Corporate Governance Ethics Code of Ethics - Benefits It provides security and predictability for employees It can contribute to building the organisation’s reputation It creates customer and stakeholder loyalty It builds trust between you and your stakeholders (the “others)

Code of Ethics – Six Key Elements Purpose Process Format Content Tone Implementation

Ethics as a Corporate Culture Performance Management Communication Recruitment Ethical Corporate Culture Selection Induction & Training Disciplinary Procedures

Ethical Decision Making Process What alternatives are available for my consideration? Are the alternatives legal? Do the alternatives meet with professional/ organisational ethical standards? Will I be able to disclose my actions?

Ethical Decision Making Tool What alternatives are available for my consideration? If Yes Are they legal? If No , Stop! Do they meet with professional/ organisational ethical standards? If Yes If No, Stop! Will I be able to disclose my actions? If Yes If No, Stop! Ethical Decision

Case Studies Case 1 At a function organised by your company in your company premises, shortly before the end of the function, you notice that your manager is busying putting cartons of drinks into the boot of his car. In that split of a second; he glances at you, smiles and says; ‘what the company doesn’t know wouldn’t hurt the company; erase this from your memory’. Then your supervisor says his goodbyes to everyone including you, and he drives out of the premises. What do you do?

Case Studies Case 2 A supplier overhears a conversation amongst your colleagues that today is your birthday; she quickly goes out to the shopping mall next to your office building to buy you a card and a box of chocolate. She comes back to your office, meets you at the reception, and wishes you ‘a happy birthday’ and gives you the birthday card and the box of chocolate. What do you do?

Case Studies Case 3 A supplier overhears a conversation amongst your colleagues that today is your birthday; she quickly goes out to the shopping mall next to your office building to buy you a card and a box of chocolate. She comes back to your office, meets you at the reception, and wishes you ‘a happy birthday’ and gives you the birthday card and the box of chocolate. The supplier is one of the three bidders your department is considering for a current tender. What do you do?

Case Studies Case 4 One of the accountants in your department has resigned and needs to be replaced. Your manager tells you that he wants to appoint Tyler, an accountant with one of your suppliers. He tells you to nevertheless go through the motions of following procedure by advertising the post internally. You agree that Tyler has the requisite qualification for the post. Once the applications have all been received, you realize that several more competent candidates from your subsidiary companies have applied. Your manager is however adamant that Tyler should be appointed. What do you do?

Case Studies Case 5 You get a call from a recruitment company requesting a reference for a person who is your acquaintance. This person was introduced to you a week ago by a mutual friend. You cannot claim to know her so well. What do you tell the caller?

Agenda Introduction to Risk 2. The Risk Management Process
3. King III and the Risk Management Process 4. Information Technology (IT) Risk 5. Compliance Risk

Definition of Risk Management
Introduction to Risk Risk Risk and Risk Management Definition of Risk The effect of uncertainty on objectives - ISO 31000 Definition of Risk Management The process of Identifying, Analysing and Ranking the importance of the identified Risks with a view to Avoiding, Eliminating, Accepting or Reducing the Business’s exposure to Risk that could negatively affect the Start-up, the Management or the Growth of a Business.

Definition of Risk and Risk Management
So, Risk Management is something new that we need to learn about Well ….. No! It’s something we do every day without even thinking about it

So let’s look at an everyday example of Risk Management
Definition of Risk and Risk Management Risk So let’s look at an everyday example of Risk Management The Objective The Risk The Controls To go out of the house but still stay Dry and Warm. Getting cold or raining wet. Putting on a long sleeve shirt, long pants, socks & shoes and taking a waterproof jacket with us.

Risk Management Process
The effect of uncertainty on objectives VISION Which states where we wish the business to go MISSION States what we want the Business to achieve at a Macro Level BUSINESS PROCESS Define the Business Processes that will be needed to achieve this Vision and Mission OBJECTIVES What do we wish to achieve with each Business Process What can prevent us from achieving the Objectives RISKS

Risk Universe Business Processes 5 Risk Categories
Social & Ethics Risk Financial Risk Operational Risk Information Technology Risk Compliance to Laws and Regulations Risk 16 Business Areas 65 Business Processes (Excluding the Business Specific Processes) 347 Risks

Risk Universe Social & Ethics Financial (Risk And Control Framework)
Retirement Funds B.B.B.E.E. Supplier Skills Development Business Continuity Planning Competitor Equity Employment Economy / Social Code of Ethics Shareholder Social Responsibility Derivatives Under Performing Assets Strategic Planning Business Partner Regulatory & Compliance Environmental impact Foreign Exchange Cash Management / Treasury Financial Accounting Funding / Debt Reputation Customer Occupational Hazards Intangible Assets Interest Rate Credit Exposure & Collectability Equity Board of Directors Government / Country Sustainability & Risk Reporting Information / Data Commodity Tax 08 - Capital Structure & Investments 01 -Governance 02- Stakeholder 03 - S.H.E. and Sustainability 04 - Intellectual Property 05 - Market Exposure 06 - Liquidity & Credit 07 - Financial Reporting Social & Ethics Financial Risk Universe (Risk And Control Framework) 16 - Compliance to Laws And Regulations Operations Information Technology 09 - Accounting 10 - Assets 11 - Legal & Insurance 12 - Human Resources 13 - Commercial Business Specific 14 - IT Environment 15 - IT Operations Management Accounting Stock Control and Logistics Legal Liability Recruitment and Retention Marketing IT Environment Modelling IT Systems Support Creditors Fixed Assets and Plant Contracts Payroll Sales Information Technology Strategy IT Systems Operations Debtors Property & Estate Insurance Pension Fund & Medical Aid Purchasing & Procurement Information Security Monitoring Fleet Control & Workshops Leave Area 17  Production Process Service Delivery Continuous Availability Industrial Relations System Development Life Cycle Performance Management Termination of Service Human Capital Management

The Risk Management Process
Business Process Selection However, not all of these BUSINESS PROCESSES will be applicable to your business – so you will need to select the ones that apply to you. If your Business does not sell on credit – you can eliminate the Debtors Business Process If your Business only buys for cash – you can eliminate the Creditors Business Process

Risk Analysis Risk The process of analysing and ranking the importance of the identified Risks Identify the Business Processes that are applicable to your Business; define the Objectives of each of these Business Processes; identify the Risks that could prevent you from achieving these Objectives; then Analyse the Risk and Rank these according to: The Likelihood that the risk would occur, and The Impact that this would have if it does occur

Wikipedia Risk

Risk Matrix 5 4 3 2 1 Impact 1 2 3 4 5 Likelihood High Risk
12 16 20 24 25 7 13 18 22 23 4 11 15 19 21 2 6 10 14 17 1 3 5 8 9 5 4 3 2 1 High Risk Medium Risk Impact Low Risk Likelihood

Non-Financial Impact Description
Risk Impact Risk Level Non-Financial Impact Description Quantitative Reputation Systems Availability 5. Severe The impact is beyond the Stakeholders’ ability to manage or resource and as such may threaten the survival of, for example, a particular project or the company itself. > R10 M Suspension of business. Systems unavailable for more than 2 days 4. Major The impact would threaten the ability to achieve the Product and/or Organisational objectives in the medium term. R2 M – R10 M Adverse media comment that has a long term impact on Company’s image, significant brand damage. Systems unavailable for more than 5 hours less than 2 days 3. Significant The impact may threaten the ability to achieve the Product and/or Organisational objectives in the short term. R500K – R2 M Adverse media comment or regulatory action or fine that has a short term reputational impact, requiring corrective action and dedicated additional resources to rectify and recover. Systems unavailable for more than 30 minutes but less than 5 hours Minor The impact can be absorbed within the day-to-day business running costs. R50K – R500K Adverse impact on some external customers, minor impact on objectives. Systems unavailable for more than 5 minutes but less than 30 minutes Insignificant The impact has little or no effect on the day to day running costs of the business < R50K Breakdown in control but process performance unaffected. Systems unavailable for less than 5 minutes

Probability of Occurrence in the next 12 Months
Risk Likelihood Risk Level Description Probability of Occurrence in the next 12 Months 5. Almost Certain Expected to occur in most circumstances or occurs regularly >70% 4. Likely Occurrence is noticeable, starting to be of nuisance value 40% - 70% 3. Possible Occurs occasionally 20%-40% 2. Unlikely Occurs infrequently 5% - 20% 1. Rare Only occurs in exceptional circumstances <5%

REDUCE THE BUSINESS’S EXPOSURE TO RISK
Risk Mitigation Risk Avoiding, Eliminating, Accepting or Reducing the Business’s exposure to Risk AVOIDING RISK To avoid risk, a business would need to transfer the risk to another party e.g. Insuring against the Risk ELIMINATING RISK To eliminate risk, a business would need to exit from the business that is causing the risk – e.g. Manufacturing Risk - stop Manufacturing and buy in the item required ACCEPT THE RISK A business may decide to accept the risk where the impact of the risk is less than the cost of controlling the Risk REDUCE THE BUSINESS’S EXPOSURE TO RISK Introduce Control

Introduction of Control
Risk Control: Controls are the actions taken to prevent an event from occurring or reduces the impact of the risk event. The Introduction of Control leads to two concepts of Risk Inherent Risk: (Pre-Control) A subjective measure of the threat of a Risk based on its Inherent Likelihood and Inherent Impact measures, without considering the effectiveness of controls, even if they exist. This produces a score that indicates the worst-case exposure in the event that there are no controls in place, or the controls fail to take effect during a risk event. Residual Risk: (Post Control) A subjective measure of the threat of a Risk based on its Residual Likelihood and Residual Impact measures, giving the remaining level of risk after risk treatment measures have been taken. Residual Risk can only be claimed if the controls are in place and work to reduce the risks and/or consequences to the level that is expected.

Risk Assessment Risk The first task of the Risk Manager in performing a risk assessment would be to determine who the effective players are in each business process to be assessed. The second step would be to determine the most effective mechanism to conduct the assessment. Two examples of these are: Risk Management Workshops – All participants in one room to discuss and determine Risk Ratings. Risk Management Questionnaires – completed by all participants, collated and summarised to form the final assessment – discussion only on contentious points where risk rating vary greatly. Automated tools are available to assist with either of these assessment mechanisms

Risk and Control Framework

King III and the Risk Management Process
King III requires the segregation of Internal Audit and Risk Management Functions Chapter 7 INTERNAL AUDIT Chapter 4 RISK MANAGEMENT 7.1 Effective Risk Based Internal Audit 4.1 Board is Responsible for Risk 7.2 Implement a Risk Based Audit Plan 4.2 Set Levels of Tolerance 4.3 Assisted by Risk Committee 7.3 Assessment of Systems of Internal Control and Risk 4.4 Management must Design & Implement Risk Plan 7.4 Audit Committee to Oversee Internal Audit 4.5 Perform Risk Assessment 7.5 Internal Audit Strategically Positioned 4.6 Implement a Framework 4.7 Respond Appropriately 4.8 Monitor Risk Continuously 4.9 Provided Assurance on Effectiveness of the Risk Process 4.10 Adequate Risk Disclosure to Stakeholders

The Board’s Responsibilities
Risk King III defines 10 Principles for Risk Management in Chapter 4 – The Governance of Risk 1) The Board should be responsible for the Governance of Risk 2) The Board should determine the levels of Risk Tolerance 3) The Risk Committee or Audit Committee should assist the Board in carrying out its Risk Responsibilities.

The Board’s Responsibilities - Contd
Risk The Board should delegate to management the responsibility to Design, Implement and Monitor the Risk Management Plan. The Board should ensure that Risk Assessments are performed on a continual basis. The Board should ensure that Frameworks and Methodologies are implemented to increase the probability of anticipating unpredictable risks. The Board should ensure that management considers and implements appropriate Risk Responses.

Risk Thus Management must: Design, Implement and Monitor the Risk Management Plan. Ensure that Risk Assessments are performed on a continual basis. Implement Frameworks and Methodologies to increase the probability of anticipating unpredictable risks. Consider and Implement appropriate Risk Responses. Monitor Risk on a continual basis.

Risk The Board should ensure continual risk monitoring by Management To facilitate the Board’s responsibility of Oversight, Management must provide feedback to the Board, in the form of: Risk Assessments, Risk Registers, Risk Mitigation Actions Plans, Monitoring & Corrective Action Reports.

The Role of Internal Audit
The Board’s Responsibilities - Contd Risk The Board should receive assurance regarding the effectiveness of the Risk Management Process. The Role of Internal Audit King III requires companies to establish an internal audit function which provides assurance over the company’s governance, risk management and internal controls. Internal audit will be required to provide a written assessment of the system of internal controls and risk management to the board, as well as a written assessment of the internal financial controls to the audit committee.

Risk The Board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders. Principle 10 covers the Relationship with Stakeholders and the Integrated Reporting to Stakeholders. The King III report details these two topics in Chapter 8 – Governing Stakeholder Relationships, and in Chapter 9 – Integrated Reporting and Disclosure.

King III defines 7 Principles for IT Governance in Chapter 5 –
Information Technology Risk Risk King III defines 7 Principles for IT Governance in Chapter 5 – The Governance of Information Technology The Governance of IT The Impact of Information Technology of Risk IT as an Integral part of the Company’s Risk Management Process

The Governance of IT Risk Principle 1 - The Board should be responsible for Information Technology (IT) Governance. Principle 2 - IT should be aligned with the performance and sustainability objectives of the company. Principle 3 - The Board should delegate to management the responsibility for the implementation of an IT Governance Framework. Principle 4 - The Board should monitor and evaluate significant IT Investments and Expenditure.

IT as an Integral part of the Company’s Risk Management Process
Principle 5 - IT should form an Integral part of the Company’s Risk Management. IT Risk should form part of the Company’s Risk Management Activities and Considerations. IT Management need to ensure that they can demonstrate adequate business resilience. IT Legal Risk arises from the possession, ownership and operational use of Technology. Companies must comply with applicable IT laws, rules, codes and standards. The Board must consider how IT could be used to aid the Company in the Management of Risk.

IT Risk Risk Principle 6 - The Board should ensure that Information Assets are managed effectively. The protection of Information (Information Security) The management of Information (Information Management); and The protection of personal information processed by companies (Information Privacy) Principle 7 - A Risk Committee and Audit Committee should assist the Board in carrying out its IT responsibilities.

Compliance Risk

How Compliance impacts on Ethics, Governance, Risk and Fraud
Compliance Risk Risk King III defines 4 Principles for Compliance in Chapter 6 – Compliance with Laws, Rules, Codes and Standards. How Compliance impacts on Ethics, Governance, Risk and Fraud

Board Responsibility Risk The Board should ensure that the Company complies with all applicable laws and considers adherence to non-binding rules, codes and standards. The Board and each individual Director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business. Compliance Risk should form an integral part of the Company’s Risk Management Process. The Board should delegate to Management the implementation of an effective Compliance Framework and Process.

Agenda What is Fraud 2. Faces of Fraud or Corruption
3. Reducing Fraud Risk 4. Detection of Fraud and Awareness Programme

“Fraud and deceit abound now more than ever before”.
Fraud Risk Fraud “Fraud and deceit abound now more than ever before”. SIR EDWARD CODE (1602)

There is no single accepted definition of fraud.
What is Fraud Fraud Definition of Fraud There is no single accepted definition of fraud. It is impossible to provide a comprehensive definition of fraud. However, all definitions have one thing in common - an element of dishonesty or deceit. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g., in Science, to gain prestige rather than immediate monetary gain.

Fraud is a crime, and also a civil law violation.
What is Fraud Fraud Elements of Fraud Fraud is a crime, and also a civil law violation. Knowingly making a false representation; Something intended to deceive; deliberate trickery intended to gain an advantage; An intentional perversion of truth; deceitful practice or device resorted to with intent to deprive another of property or other right; The intentional and successful employment of cunning, deception, collusion; or artifice used to cheat or deceive another person whereby that person acts upon it to the loss of his property and to his legal injury;

Unfair advantage by unlawful or unfair means;
What is Fraud Fraud Elements of Fraud (contd) Unfair advantage by unlawful or unfair means; Intentional deception resulting in injury to another person; The act of leading a person to believe something which you know to be false in a situation where you know the person will rely on that thing to their detriment; A deception, intended to wrongfully obtain money or property from the reliance of another on the deceptive statements or acts, believing them to be true; The intentional perversion of the truth in order to mislead someone into parting with something of value;

For a fraud to occur there are 3 elements required, these are:
What is Fraud Fraud Elements of Fraud (contd) For a fraud to occur there are 3 elements required, these are: Need – The first element is a need, whether actual (Spouse is retrenched) or perceived (just have to have that new Boat) Justification – Entitlement, this is owed to me because…… Opportunity – the perpetrator has to have access to the Cash, Asset, persons to be used or whatever is to be used / removed

Definition of Fraud Fraud For purposes of this presentation, we will use the following definition. Fraud is the intentional deception to cause a person to give up property or some lawful right or to damage another individual using deceit, trickery or cheating.

Corruption is the abuse of entrusted power for private gain
Definition of Corruption Fraud Corruption is the abuse of entrusted power for private gain It hurts everyone who depends on the integrity of people in a position of authority

Prevention and Combating of Corrupt Activities Act, Act No. 12 of 2004
Fraud (CHAPTER 2 - OFFENCES IN RESPECT OF CORRUPT ACTIVITIES) (Part I: General offence of corruption) Any person who directly or indirectly - accepts or agrees or offers to accept any gratification from any other person, whether for the benefit of himself or herself or for the benefit of another person: or gives or agrees or offers to give to any other person any gratification, whether for the benefit of that other person or for the benefit of another person, in order to act personally or by influencing another person so to act in a manner - that amounts to the- (aa) illegal, dishonest, unauthorised, incomplete, or biased: or (bb) misuse or selling of information or material acquired in the course of the exercise, carrying out or performance of any powers, duties or functions arising out of a constitutional, statutory, contractual or any other legal obligation: (ii) that amounts to - (aa) the abuse of a position of authority: (bb) a breach of trust; or (cc) the violation of a legal duty or a set of rules: (iii) designed to achieve an unjustified result: or that amounts to any other unauthorised or improper inducement to do or not to do anything. is guilty of the offence of corruption

What's Good for the Goose is Good for the Gander
Key Drivers in the Current Economic Climate Fraud One of the Key Drivers for Fraud and Corruption is : PEER INFLUENCE. If the Politicians and Government not only in South Africa, but around the world are open to Corruption, then why not me? What's Good for the Goose is Good for the Gander

Transparency International
Key Drivers in the Current Economic Climate (Contd) Fraud Transparency International --- The global coalition against Corruption --- The Corruption Perceptions Index ranks countries / territories based on how corrupt a country’s public sector is perceived to be. It is a composite index, drawing on corruption-related data from experts and business surveys carried out by a variety of independent and reputable institutions. Scores Scores range from 0 (highly corrupt) to 10 (very clean).

Corruption Perception Index (2011)
Fraud SOUTH AFRICA Population (2010): 50 million * GDP (2010): $363.7 billion * Infant mortality rate (per 1,000 live births ): 40.7 * Life expectancy (2009) 51.61 years * Literacy rate (2007) 88.7% Corruption Perception Index (2011) Ranking 64 / 183 Score 4.1 / 10 0 (Highly Corrupt) to 10 (Very Clean)

Corruption Perception Index (2011) - contd Fraud UNITED KINGDOM * Population (2010): 62.2 million * GDP (2010): $2.25 trillion * Infant mortality rate (per 1,000 live births ): 4.6 * Life expectancy (2009) 80.05 years Corruption Perception Index (2011) Ranking 16 / 183 Score 7.8 / 10 0 (Highly Corrupt) to 10 (Very Clean) Stats from World Bank One of the Three Giants

UNITED STATES OF AMERICA Corruption Perception Index (2011)
Corruption Perception Index (2011) - contd Fraud UNITED STATES OF AMERICA * Population (2010): 309.1 million * GDP (2010): $14.59 trillion * Infant mortality rate (per 1,000 live births ): 6.5 * Life expectancy (2009) 78.09 years Corruption Perception Index (2011) Ranking 24 / 183 Score 7.1 / 10 0 (Highly Corrupt) to 10 (Very Clean) One of the Three Giants

Corruption Perception Index (2011) - contd Fraud AUSTRALIA * Population (2010): 22.3 million * GDP (2009): $ billion * Infant mortality rate (per 1,000 live births ): 4.1 * Life expectancy (2009) 81.54 years Corruption Perception Index (2011) Ranking 8 / 183 Score 8.8 / 10 0 (Highly Corrupt) to 10 (Very Clean) One of the Three Giants

Corruption Perception Index (2011) - Contd Fraud BRAZIL * Population (2010): 194.9 million * GDP (2010): $2.09 trillion * Infant mortality rate (per 1,000 live births ): 17.3 * Life expectancy (2009) 72.76 years * Literacy rate (2008) 90% Corruption Perception Index (2011) Ranking 73 / 183 Score 3.8 / 10 0 (Highly Corrupt) to 10 (Very Clean) One of Our Trading Partners

Corruption Perception Index (2011) - Contd Fraud NIGERIA * Population (2010): 158.4 million * GDP (2010): $ billion * Infant mortality rate (per 1,000 live births ): 88.4 * Life expectancy (2009) 50.95 years * Literacy rate (2009) 60.8% Corruption Perception Index (2011) Ranking 143 / 183 Score 2.4 / 10 0 (Highly Corrupt) to 10 (Very Clean) One of Our Trading Partners

Corruption Perception Index (2011) - Contd Fraud CHINA * Population (2010): 1.3 billion * GDP (2010): $5.93 trillion * Infant mortality rate (per 1,000 live births ): 15.8 * Life expectancy (2009) 73.06 years * Literacy rate (2009) 94% Corruption Perception Index (2011) Ranking 75 / 183 Score 3.6 / 10 0 (Highly Corrupt) to 10 (Very Clean) One of Our Trading Partners

Corruption Perception Index (2011) Our Closest Neighbours
Corruption Perception Index (2011) - Contd Fraud NAMIBIA * Population (2010): 2.3 million * GDP (2010): $12.17 billion * Infant mortality rate (per 1,000 live births ): 29.3 * Life expectancy (2009) 61.62 years * Literacy rate (2009) 88.5% Corruption Perception Index (2011) Ranking 57 / 183 Score 4.4 / 10 0 (Highly Corrupt) to 10 (Very Clean) Our Closest Neighbours

Corruption Perception Index (2011) - Contd Fraud BOTSWANA * Population (2010): 2 million * GDP (2010): $14.86 billion * Infant mortality rate (per 1,000 live births ): 36.1 * Life expectancy (2009) 53.01 years * Literacy rate (2009) 84.1% Corruption Perception Index (2011) Ranking 32 / 183 Score 6.1 / 10 0 (Highly Corrupt) to 10 (Very Clean) Our Closest Neighbours

Corruption Perception Index (2011) - Contd Fraud ZIMBABWE * Population (2010): 12.6 million * GDP (2010): $7.47 billion * Infant mortality rate (per 1,000 live births ): 50.9 * Life expectancy (2009) 48.45 years * Literacy rate (2009) 91.9% Corruption Perception Index (2011) Ranking 154 / 183 Score 2.2 / 10 0 (Highly Corrupt) to 10 (Very Clean) Our Closest Neighbours

Corruption Perception Index (2011) - Contd Fraud MOZAMBIQUE * Population (2010): 23.4 million * GDP (2010): $9.59 billion * Infant mortality rate (per 1,000 live births ): 92.2 * Life expectancy (2009) 49.28 years * Literacy rate (2009) 55.1% Corruption Perception Index (2011) Ranking 120 / 183 Score 2.7 / 10 0 (Highly Corrupt) to 10 (Very Clean) Our Closest Neighbours

Faces of Fraud and Corruption
From amongst the many Faces of Fraud, we have chosen to focus on the following four: Asset Misappropriation Financial Misstatement Computer Crime Identity Theft

Techniques to monitor or detect Asset Misappropriation:
Tips and Techniques Fraud Techniques to monitor or detect Asset Misappropriation: Customer returns, credits or write-offs Unallocated payment / Suspense accounts Inventory scrap, spoilage, obsolescence Inventory shrinkage Fixed asset write-offs

Techniques to Prevent Asset Misappropriation:
Tips and Techniques Fraud Techniques to Prevent Asset Misappropriation: Employee monitoring via CCTV or Management-by-walk-about Segregation of duties Examination and countersigning of documentation Examination of cancelled cheques Independent verification Surprise audits Job rotation Physical security

Understanding your Risk of Fraud Hardening your Controls against Fraud
Reducing Fraud Risk Fraud Understanding your Risk of Fraud Hardening your Controls against Fraud

Embedding Fraud Awareness in the Workplace
Detection of Fraud and Awareness Programme Fraud Embedding Fraud Awareness in the Workplace Whistle Blowing – Methods and Protection

Questions ?

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