HR: The Generals of the War against Fraud
The role and responsibility of the Human Resources Team in
Corporate Fraud mitigation
“Human Resources isn’t a thing we do. It’s the thing that runs our business.” – Steve Wynn
The Human Resources team of any organisation is in actuality the most integral cog of the
organisation. Without a strong, successful and efficient human resource team, a business will lose its
essence. But Human Resources goes way beyond hiring and recruitment, it is a team dedicated to
bridging the gap between the senior management and employees. It formulates policies that are in
the benefit of the organisations. They make decisions that affect the well-being of the business.
But there is one very important aspect of HR that is often set aside, never given prominence despite it
being an imminent threat. The HR plays a crucial role in the mitigation and prevention of corporate
Duty Calls: The Role of Human Resources
Corporate fraud usually stems from disengaged and dissatisfied employees. Such employees are
quite likely to sway towards the path of fraud and rationalise their actions sooner too. They lack
motivation and loyalty towards the company which drives them to such a point. An effective Human
Resource team not only detects the disgruntlement of the said employees, but resolves it immediately
so that it does not amount to disastrous consequences. Then again, HR policies must not allow much
room for inspiring the loss of employee morale.
Generally speaking, the Human Resource team plays four pivotal roles for the organisation:
This part is building a framework and training them to a happy, fraud-resistant workplace.
1. Active involvement in fraud investigations in order to acquaint the team with the process
2. Training to hone detection skills for disengaged employees or to notice the tell-tale signs of a
3. Pinning the direct responsibility of the acceptance and promotion of false content supplied by
the employee to prevent involvement of the Human Resource department in the fraud.
The Keen Analyst
The role of an Analyst is that of the supreme observer. The HR team, in this part, monitors and tracks
changes in the employee behaviour and notices cracks in the policy, if any.
Overall, this role primarily focusses on observing patterns and smoothening ends. 81% fraudsters
display classic alert signs that are picked up, can avoid major consequences.
Another crucial role for the HR is that of a distributor of knowledge, aka Guru. This role entails training
employees and their managers the process and policies related to fraud prevention and reporting of
fraud as they see it.
For employees, the HR policy on fraud should be deep seated in them during the induction process.
They should also be trained about the various frauds that could exist within the organisation and how
to be vocal about their suspicions of the same.
Insider threat of fraud can stem from anyone in the organisation, from top performers to senior
executives. It is thus very important that the organisation has clear and defined rules for fraud
prevention and mitigation. Nearly half of the respondents to the 2010 Ernst & Young Global Fraud
Survey claimed that their organisation did not have well-defined roles for different groups when
responding to reports of possible fraud. Even with anti-fraud training, companies focus too much on
occupational fraud. The training must also cover other important areas such as corruption, financial
statement fraud, misconduct, vendor fraud, theft of intellectual property and mishandling sensitive
Also, vendors and contractual employees must also be aware of the company policies so that they
pose no threat to the integrity of the organisation.
Drafting and implementing policies is not the same without someone to enforce them. Here the HR
plays the enforcer.
Whilst induction/training, The HR must emphasise on the “no tolerance policy” when it comes to fraud.
Not only does it send a powerful message, it also instils company integrity. Moving forth with a firm
hand would prevent slippage later.
Also, the candidate evaluation and pre-employment verification should be rigorous and careful. This
also ensures that a “red flagged” employee does not stand a chance in your organisation.
The Plot Thickens: What is to be taken care of?
Environment -A rewarding, friendly and professional environment is something that inspires employee
loyalty and breeds trust. The management’s attitude, the policies, the employee perception promotes
a healthy image of the organisation, aiding in the mitigation of fraud.
Code of Conduct – Strictly laid out laws and guidelines help in ethical conduct and provide clarity
about what is right and wrong from the perspective of the company.
Reporting Mechanism – How are things reported? Is it too complicated? Is the authority
Recruitment & Training- Due diligence done on the employees before hiring and proper training after
the hire has been made is an investment made in the bright future of the employees in the
Fraud Response Plan- An effective response plan when disaster strikes is the best way to avoid
chaos, confusion and panic. A prepared organisation is a smart organisation.
Exit Interviews – When an employee leaves your organisation, conduct extensive exit interviews as to
judge the real reason. This not only provides effective feedback, but can also lay the groundwork for
future company policies.
What Lies Ahead
“Equipment, procedures – those things can be duplicated. Human capital is the only area
where companies can really differentiate themselves.”– Meldron Young
The pure power of Human Resources is unparalleled. And so is the extent of its responsibilities in an
organisation. With impeccable communication and clearly defines measures, the HR can produce
incomparable synergy between the employees and the management, leading to a happier, healthier,
fraud-free work environment. Process follows culture and culture is predicted with leader’s attitudes
and choices. After all, in order to deal with fraud, the organisation must unite within itself.
The war against fraud is long ongoing and won’t stop any time soon. But our sentinel Generals in the
Human Resource Department can turn it around for us. We say, charge!
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