Software Uncovers White-Collar Crime

Article excerpt

Software

White-collar crime costs companies an estimated $40 billion every year. But while risk managers realize that white-collar crime represents a major risk for most businesses, they also know that it is one of the most difficult risks to detect and prevent.

In effect, no statistic can reflect the true financial toll of embezzlement, fraud, theft and errors and omissions. Undoubtedly, these crimes cause major operational disruptions and impact the corporate bottom line not only in terms of financial loss, but in adverse publicity and large fees for criminal proceedings as well.

That's why risk managers have begun to tackle white-collar crime by making its detection and prevention an integral part of their corporate loss control program. Software firms specializing in crime prevention are following this trend by developing products to assess and prevent these losses.

"The risk manager has an increasingly important role in financial reporting requirements," says Stanley Halper, president of the Audit Committee Support Network Inc., a consulting firm based in Plainview, NY. "It is usually the risk manager who, in being responsible for the loss control program, must present and certify internal audits to the board."

Risk Reporter, a software program developed by Kilclare Software in Dublin, Ireland, is designed to reveal a company's potential exposure to white-collar crime and thereby mitigate the likelihood of criminal losses. By pinpointing flaws and loopholes in a company's internal control system, the software allows risk managers to identify and quantify their organization's vulnerability to loss due to fraud and other criminal acts.

The user begins the program by choosing a risk area such as sales, payroll, information security or purchasing and then responds to a series of questions designed to provide a profile of the company's control objectives in this area. Using this data, the software provides "what can go wrong" scenarios if the objectives are not achieved, highlighting areas vulnerable to kickbacks and fraudulent payments. It then recommends procedures to help the risk manager achieve the control objectives. For example, to prevent fraudulent payments, the program might recommend using identification numbers, security codes and passwords for terminal users.

Kilclare Software offers a discount to companies with fidelity coverage from National Union Fire Insurance Co. …