What is the biggest risk to shareholder value?
Chris Fordham, managing partner, Fraud Investigation & Dispute Services, EY Asia-Pacific, feels failure to address risk comprehensively leaves corporates at higher risk of institutional fraud. March 03, 2014 | Chris FordhamA failure by most companies in Hong Kong to address all areas of the corporate fraud picture is leaving many exposed to what is potentially one of the most damaging types of fraud – institutional fraud. Institutional fraud, also known as management fraud or “cooking the books”, has the potential to significantly damage ongoing company performance and shareholder value, and led to the collapse of several companies listed on the Hong Kong Stock Exchange in recent years. Yet despite the widespread adverse impact institutional fraud can have on a company’s ability to survive in today’s challenging economic conditions, the detrimental impact of this type of fraud is only now starting to come under increased scrutiny as we continue to see more cases come to light. My experience is that senior management is generally well aware of the risks and controls needed to protect the company against internal and external fraud. For example, most companies have introduced systems and controls to prevent or detect a situation where employees commit fraud against the company for their own gain. Companies understand that such instances could potentially bring about financial loss and reputational damage to the company. The same can be said about external fraud, where a third party colludes with employees of a company in order to reap monetary or commercial benefits. However one of the most common oversights by senior management is in protecting the company from the occurrence of institutional fraud, which includes misrepresentation of the financial performance of companies. This exposure can perhaps be attributed to the fact that those responsible for the design and implementation of the anti-fraud program could very well be the same individuals who could damage the company’s shareholder value. Part of addressing this involves companies ensuring that a complete fraud risk assessment is undertaken, with significant input from the independent director... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Hong Kong, Operational Risk, Risk & Compliance, Risk and RegulationHK,Oprisk,Risk & Compliance,Risk and Regulation, Hong Kong,Operational Risk,Risk & Compliance,Risk and Regulation, Keywords:Chris Fordham, HKEx, Corporate Ethics, Governance, Foreign Corrupt Practices Act, UK Bribery Act Chris Fordham, HKEx, Corporate Ethics, Governance, Foreign Corrupt Practices Act, UK Bribery Act
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