In order to succeed with your work against irregularities, it is important to work preventively to detect risks at an early stage. The definition of irregularities is any undesirable behavior with consequences for reputation or business. Here you can read about how you should think about the prevention of irregularities and how you can start working actively with it to stay one step ahead.
Which parts of an organization are at higher risk of irregularities?
The times when an organization is at higher risk of irregularities are when there are deficiencies in the control environment. Problems can also arise if the work with irregularities takes place in silos, as follow-up and communication takes place separately in the organization. To gain a greater understanding of why irregularities occur, one can use the well-known Fraud Triangle, created by Cressey in 1953, which consists of three contributing factors to fraud.
Pressure is, for example, about an individual feeling private financial stress or pressure from managers to succeed. That pressure can lead to the individual performing actions that damage the business.
Opportunity is about the individual feeling that they have the ability to commit the act. It is therefore important that the organization knows how employees should perform their jobs and how the business should be conducted. Failure to identify opportunities may contribute to increased risk of irregularities as there may be gaps in control.
Rationalization is about the individual committing the act being able to rationalize their actions. The individual feels that they have the right to act against the rules because they consider that they are entitled to it. If the organization has not been clear about what constitutes acceptable behavior, there is a risk of rationalization.
How to prevent irregularities?
In order to prevent irregularities, it is important that there are clear expectations and clear requirements. If one of the factors in the Fraud Triangle is reduced, the likelihood of irregularities is reduced.
The vast majority of organizations already have processes and routines in place to counter irregularities, but mostly because it has to be there. It is also common that the processes and routines are not adapted to the business, which makes it difficult to maintain them.
How do you start your work with irregularities?
We believe that there are three central parts in the work with irregularities and which contribute to reducing all factors in the Fraud Triangle; pressure, opportunity and opportunity.
- Identify risks and implement controls
A first step in working with irregularities is to identify risks. Here it can be good to have a risk workshop where you brainstorm together about risks. The next step is to assess the risks and then prioritize the risks. Controls are then implemented in working methods and routines to constantly improve and strengthen the process.
- Work with the culture in the organization
Many people struggle with preventing irregularities because they feel that they are already taking several actions, but they still do not reach out into the organization. An important part of this is the culture within the organization and how to continue working with it. We at Stratsys bellieve that cultural work is a key factor for successful work against irregularities.
- Competence and resource provision
All organizations are in constant change and this may be due to internal or external conditions. It is therefore important to ensure that the right supply of skills and resources are in place to be able to meet new needs, conditions and associated risks. Remember that it does not have to be within the organization, you can also use external help.
In conclusion, think scalability to make it manageable for the whole organization and start as soon as possible. Find the right way of working so that it suits your organization and work with it continuously. Taking small steps in the right direction is better than doing nothing at all.
Do you want to know more about what a risk management system can do for your organization? Read more about Stratsys' products for GRC management here.