Risk Archives - Lion and Palm Tree

Why people commit fraud

This post is a twin of my last one on Teaching Ethics in Management and Accounting because they originated in my reading of two related articles on fraud by Seb Murray (Financial Times, 13 June 2022). As the post became too unwieldy, I decided that it made better sense to split it into two.

This post also takes off from a passing reference to Donald Cressey in another recent post on Strategic Risk in Banking. Another post on Fraud, Terrorism, and Bathtub, had mentioned how those who want to commit fraud learn the loopholes over a period of time. Those loopholes provide the opportunity for fraud as discussed below. The discerning reader may also find in this post a resonance of the determining factors mentioned in yet another post on Why People Wore Masks. While wearing a mask is an act of compliance with a regulation, committing a crime is deviant behaviour, essentially constituting noncompliance with socially and culturally accepted norms, and/or in defiance of legal or regulatory sanctions. Continue reading “Why people commit fraud”

Strategic Risk in Banking

This post is the second part of my earlier post on reputation risk. It is an enlarged version of the portion on strategic risk from my speaking notes used for a talk on reputation and strategic risk to the members of the Board of Directors of a bank based outside India. Needless to say, this is an introductory piece, as strategy, its risks, and their management, together constitute a huge subject in itself.

Continue reading “Strategic Risk in Banking”

Managing reputation risk

This is an edited and updated version of my speaking notes used for an address on managing strategic and reputation risk to the members of the Board of Directors of a bank based outside India. I will cover strategic risk in a future post. The talk drew substantially from the writings of Prof. Charles R. Fombrun, especially his book on Reputation, apart from other references as indicated. Continue reading “Managing reputation risk”

Frauds, terrorism, and bathtub curve

Lessons from reliability and bathtub curve for busting crimes

Frauds and terrorism

Formidable military cantonments with awe-inspiring security have existed for centuries. Treasure, including notes and coins, have also moved for centuries. Banks have time-honoured systems and processes for internal control and audit.

Nevertheless, we hear of security breaches in military establishments. The choice of time, location, and other details point to a high level of planning. Daring and well-planned train robberies involving sovereign treasure make some Western flicks seem like minor pickpocketing. Bank frauds the size of several Satyam frauds point to governance failures from top to bottom. Investigations followed, and responsibility fixed. The immediate causes were familiar. System failures, noncompliance with laid down procedures, and ignoring established norms. One rarely identified root causes to see why noncompliance took place. And what actions could prevent them in the future. Continue reading “Frauds, terrorism, and bathtub curve”