We are in the middle of the fastest transformation the global economy has ever experienced. The coronavirus (COVID-19) pandemic has resulted in billions of people not being allowed to work and having to stay at home. Millions of people face unemployment, and governments are working day and night to provide financial and medical support. It’s also an incredibly testing time for the functioning of organizations.
Employees at companies around the world are still trying to be productive and perform their jobs from remote locations. Employers are concerned about the health and safety of their staff, but also whether their organizations will survive. In this context, companies must resist the temptation to sacrifice their controls, systems, governance and appropriate culture in adjusting to the new realities of COVID-19.
Fraud risk factors increase at a time of crisis because companies and individuals face more financial pressures, the opportunity for fraud increases if key internal controls weaken, and people find it easier to rationalize their actions. All fraud requires these three elements – opportunity, pressure and rationalization – to be present (known as the Fraud Triangle). COVID-19 offers all three and more.
The pandemic has potentially compromised the ability to undertake effective compliance monitoring, supervision and oversight, creating an opening for criminal and unethical behavior. The danger is that multiple layers of governance processes, previously effective controls and oversight of employee and management conduct are all relaxed – possibly in the name of business continuity. At the same time, the organization’s wider integrity culture comes under threat – the end is used to justify the means.