COVID-19 and corporate fraud: Study presents impacts and solutions in area of compliance
Discussing the impact of the COVID-19 pandemic on vulnerabilities related to corporate fraud, particularly in the areas of governance, risk and compliance (GRC), is the central focus of an article published in business journal GV-Executive, called “COVID-19: A Window of Opportunity for Corporate Fraud?” Professionals in these areas have noticed an increase in vulnerabilities due to organizational changes caused by the pandemic, but they have also taken measures to mitigate them.
Researchers Iedo Matuella Filho (who has a master’s degree from the Ribeirão Preto School of Economics, Administration and Accounting, part of the University of Sao Paulo), Claudio de Souza Miranda (a professor at the aforementioned school) and Jonny Mateus Rodrigues (a professor at Fundação Getulio Vargas’ Sao Paulo School of Business Administration, FGV EAESP) used the fraud triangle theory, which considers pressure, opportunity and rationalization as factors that increase the risk of fraud.
The results of their research indicated an increase in risks in all three aspects of the fraud triangle during the pandemic. However, companies have invested in internal controls to deal with these increased risks. In addition, the study highlights the importance of GRC activities in reducing cases of corruption and fraud.
During the pandemic, companies adopted remote working, which brought about internal communication challenges and increased cyber risks. However, to counter this, they have invested in technology and cybersecurity. Companies have also strengthened their GRC activities, setting up crisis committees, reinforcing integrity and making improvements in areas such as due diligence.
GRC professionals perceived a more stressful and less supervised environment due to remote working, which contributed to heightened fraud risks. However, most companies have invested in controls and technology to deal with these challenges.
As for the future, the study indicated that the adoption of remote working, the automation of processes and controls, and the increased use of technology will continue to be trends. On the other hand, crisis committees are seen as a temporary initiative.
The authors’ recommendations include maintaining remote working security measures, investments in technology and controls, contingency plans, training in business ethics and fostering an organizational culture of integrity. In addition, leaders must set an example and support integrity and compliance with regulations.
You can read the full article here.