ARiMI	
  –	
  Asia	
  Risk	
  Management	
  Ins0tute	
   NOTES	
  
By MARC RONEZ
Chief Risk Strategist & Master Coach
Asia...
Agenda	
  for	
  this	
  Session	
  	
  	
  
þ Understand what blowing the whistle means and why it is
important for orga...
1 - Understanding what is..
a Whistle Blower and the Need for
more effective Whistle Blowing
Policies & Systems	
  
Whistl...
NEED	
  for	
  more	
  effec8ve	
  Fraud	
  Risk	
  Management?	
  
A continuous and constant stream of crises and corporat...
Root causes for many Organization's Problems
The examinations that followed many corporate collapses
revealed a common the...
6
Famous	
  “Fallen”	
  Corporate	
  Leaders	
  
Ken Lay, Enron Calisto Tanzi, Parmalat TT Durai, NKF
Bernie Ebbers
WorldC...
Famous	
  Whistleblowers	
  
Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI
2013
7
Whistleblowers such as
Sherron...
What	
  is	
  a	
  Whistleblower?	
  
It is a WITNESS, somebody who has observed (&
sometimes participated in) suspected c...
9
Why a Whistle Blowing Policy is IMPORTANT?
?
Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
10
Why a Whistle Blowing Policy is IMPORTANT?
They are essentially two main reasons:
1.  An organisation's own staff accou...
11
Why a Whistle Blowing Policy is important ?
Surveys show that an organisation's own staff
accounts for 70 to 80% of fra...
How frauds are usually detected?	
  
Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI
2013
12
13
Consequences of NO Whistle Blowing Policy?
­ In most case cases, people will keep quiet! You will not
know until it is...
2 - Understanding why..
Practically people find to very hard to
Blow the Whistle 	
  
Whistle Blowing System – MARC RONEZ ...
15
The Dilemma of 'would be’ Whistleblowers – A
scenario
¤ Johnny Goodguy, believes in hard work, personal
integrity, loy...
16
The Dilemma of Whistleblowers
According to the Code of Conduct of his
organization, Mr Goodguy should first
express his...
17
The ”Painfull” Fate awaiting Whistleblowers
­ They are unlikely to be called heroes, but rather “traitors”
or “snitche...
18
Why most Employees will usually be reluctant
to ‘blow the Whistle?’
Whistle Blowing System – MARC RONEZ - Copyright @ A...
19
RETALIATION Against Whistleblowers
•  blaming the whistleblower for the problem;
•  “payback” complaints against the wh...
The ”Painfull” Fate awaiting Whistleblowers 	
  
Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI
2013
20
21
Legal protection for Whistle Blowers
¤ Many countries have introduced
whistleblower protection laws
in varying scopes ...
22
Sarbanes-Oxley Act about Whistle Blowing
•  Sarbanes-Oxley Section 1107 makes it a crime for
anyone, with intent to ret...
Legal	
  Protec8on	
  for	
  Whitleblowers	
  is	
  NOT	
  Enough!	
  
Whistle Blowing System – MARC RONEZ - Copyright @ A...
3 – Designing an Effective..
Whistle Blowing Policies & Systems to
encourage whistle blowing in your
organization
	
  
Whi...
25
Sarbanes-Oxley Act about Whistle Blowing
Sarbanes-Oxley §301, require audit committee to establish
procedures for:
1. R...
26
Barriers to Whistle Blowing Practices
According to surveys more than 50% of employees in the
United States do not feel ...
Whistle Blowing Policy 	
  
You need a Whistle
blowing policy & system!
Whistle Blowing System – MARC RONEZ - Copyright @ ...
28
Prerequisites for whistleblowers
þ Guidance on what is right or
wrong
þ Confidence that they will be
protected
þ Mus...
29
The Code of Conduct Ethics
¤ The purpose of the “code of ethics” is to provide a
VISIBLE Reference Point to DETER wron...
30
Fraud Reporting Channels / Hotline
Leadership, Strategy &
Oversight
Executive
Management
Board of Directors
Employees
I...
Culture & Fraud Risk Management	
  
Your corporate culture to support Good and Effective
FRAUD risk management practices m...
32
The Keys Elements of Whistle blowing Policy
þ Set and map the ways by which employees can make
their concerns known ab...
33
In Summary, the Keys Elements of Whistle blowing
Policy are..
Code of conduct &
ethics
Proper
investigation
Procedures
...
Marc	
  Ronez	
  -­‐	
  Chief	
  Risk	
  Strategist	
  &	
  
Knowledge	
  Leader	
  at	
  ARiMI	
  -­‐	
  Asia	
  Risk	
  ...
Risk	
  Management	
  is	
  a	
  con/nuous	
  journey,	
  not	
  a	
  
des/na/on!	
  
Whistle Blowing System – MARC RONEZ ...
 ARiMI	
  –	
  Asia	
  Risk	
  Management	
  Ins8tute	
  
Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 36
ARiMI	
  is	
  an	
  applied	
  research	
  and	
  business	
  studies	
  ins0tute	
  that	
  
was	
  set	
  up	
  in	
  2...
 	
  	
  ARiMI	
  -­‐	
  Focus	
  and	
  Exper8se	
  
● Crisis management &
Business Continuity
● Leadership risk decision...
39
For more information on ARiMI,
check our website at:
www.arimi.org
Whistle Blowing System – MARC RONEZ - Copyright @ AR...
Important Note: Please note that that this presentation and its
contents, is the intellectual property of the Asia Risk Ma...
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Internal Fraud conference 2013 - Effective Whistleblowing Policy to fight Fraud

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Promoting Whistle Blowing as an effective mechanism for fraud prevention and detection in organisations.

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Internal Fraud conference 2013 - Effective Whistleblowing Policy to fight Fraud

  1. 1. ARiMI  –  Asia  Risk  Management  Ins0tute   NOTES   By MARC RONEZ Chief Risk Strategist & Master Coach Asia Risk Management Institute Encouraging  WHISTLE  BLOWING  as  an  effec8ve   tool  to  Prevent  &  Detect  Fraud   IA Conference 2013, ASLI Malaysia, 9 April 2013
  2. 2. Agenda  for  this  Session       þ Understand what blowing the whistle means and why it is important for organizations þ Reasons why it is not easy to blow the whistle on unethical and fraudulent management practices þ Identify the policies and systems needed to encourage appropriate whistle blowing in your organization Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 2
  3. 3. 1 - Understanding what is.. a Whistle Blower and the Need for more effective Whistle Blowing Policies & Systems   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 3
  4. 4. NEED  for  more  effec8ve  Fraud  Risk  Management?   A continuous and constant stream of crises and corporate failures over the past 10-15 years have put the spotlight on ethical and fraud issues in Organizations. Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 4
  5. 5. Root causes for many Organization's Problems The examinations that followed many corporate collapses revealed a common theme behind the institutions‘ troubles i.e. The People’s Factor!: ­ high-profile scandals involving unethical abuse of corporate power due to greed and conflict of Interests, ­ In a number of cases, fraudulent/criminal activities by corporate officers. ­ A lack of responsibility, accountability and oversight of corporate operations at every level of management; ­ An inherent Blindness and human Complacency to Risk; ­ A people issue circumventing control systems in place 5 Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  6. 6. 6 Famous  “Fallen”  Corporate  Leaders   Ken Lay, Enron Calisto Tanzi, Parmalat TT Durai, NKF Bernie Ebbers WorldCom Ong Boon Kheng , Informatics Allen Stanford, Stamford Madoff, Investment Ramalinga Raju, Satyam Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 6
  7. 7. Famous  Whistleblowers   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 7 Whistleblowers such as Sherron Watkins, of Enron, have raised the ALARM against very powerful people bringing under the spotlight the fraudulent behaviors of people previously considered as business heroes such as Ken Lay from ENRON.
  8. 8. What  is  a  Whistleblower?   It is a WITNESS, somebody who has observed (& sometimes participated in) suspected corruption, fraudulent or unethical activities and decides to a make a public disclosure about it. Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 8
  9. 9. 9 Why a Whistle Blowing Policy is IMPORTANT? ? Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  10. 10. 10 Why a Whistle Blowing Policy is IMPORTANT? They are essentially two main reasons: 1.  An organisation's own staff accounts for most of fraud losses. 2.  Tips are one of the most common way to find out about existing internal frauds Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  11. 11. 11 Why a Whistle Blowing Policy is important ? Surveys show that an organisation's own staff accounts for 70 to 80% of fraud losses. Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  12. 12. How frauds are usually detected?   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 12
  13. 13. 13 Consequences of NO Whistle Blowing Policy? ­ In most case cases, people will keep quiet! You will not know until it is too late! ­ Some employees will even be compromised ­ Some employees will make anonymous disclosures and rumors will spread ­ Anonymous allegations are often too incomplete to be acted upon ­ More risks of malicious allegations ­ Possibility that a dissatisfied employee may contact the media or the police directly. Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  14. 14. 2 - Understanding why.. Practically people find to very hard to Blow the Whistle   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 14
  15. 15. 15 The Dilemma of 'would be’ Whistleblowers – A scenario ¤ Johnny Goodguy, believes in hard work, personal integrity, loyalty, and family. As a professional in a growing company, he just wants to do a good job for his employer and pursue a successful career. ­ But what will happen to Mr. Goodguy’s professional life if he inadvertently find out that some important transactions that have been voluntarily reported incorrectly in the financial statements? Or that some senior managers have committed illegal acts? What should he do? Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  16. 16. 16 The Dilemma of Whistleblowers According to the Code of Conduct of his organization, Mr Goodguy should first express his concerns to the higher level of management. But what if … The Management does not want to listen or worse is involved in the misleading statements,.. What should Mr. Goodguy do then? Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  17. 17. 17 The ”Painfull” Fate awaiting Whistleblowers ­ They are unlikely to be called heroes, but rather “traitors” or “snitches.” ­ They will not likely be portrayed as “team players,” but rather disloyal & disgruntled employees. ­ They often lose friends, lose careers opportunities, and endure significant personal stress. ­ While some have benefited in lucrative speaking engagements and book deals, this is the exception, NOT the rule. ­ The REALITY is that Employees like John Goodguy whatever they do, are in a LOOSE-LOOSE situation. Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  18. 18. 18 Why most Employees will usually be reluctant to ‘blow the Whistle?’ Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 For current members of staff that do blow the whistle, the consequences are often very painful!
  19. 19. 19 RETALIATION Against Whistleblowers •  blaming the whistleblower for the problem; •  “payback” complaints against the whistleblower; •  loss of opportunity for advancement; •  harassment and/or victimization; •  disciplinary action or dismissal; •  legal action against the whistleblower, for defamation, or breach of confidence or secrecy; •  or even physical assault. Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  20. 20. The ”Painfull” Fate awaiting Whistleblowers   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 20
  21. 21. 21 Legal protection for Whistle Blowers ¤ Many countries have introduced whistleblower protection laws in varying scopes as part of their anti-corruption efforts. ¤ The laws are meant to encourage individuals to speak out if they find corrupt practices or improper conduct in their workplace. Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 ¤ It provides some protection to informers, or “whistleblowers”, in terms of confidentiality of information as well as immunity from civil and criminal action.
  22. 22. 22 Sarbanes-Oxley Act about Whistle Blowing •  Sarbanes-Oxley Section 1107 makes it a crime for anyone, with intent to retaliate, to take any action harmful to anyone for providing to law enforcement officer any truthful information relating to commission of any federal offense. •  Maximum punishment is 10 years incarceration and fine Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  23. 23. Legal  Protec8on  for  Whitleblowers  is  NOT  Enough!   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 23
  24. 24. 3 – Designing an Effective.. Whistle Blowing Policies & Systems to encourage whistle blowing in your organization   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 24
  25. 25. 25 Sarbanes-Oxley Act about Whistle Blowing Sarbanes-Oxley §301, require audit committee to establish procedures for: 1. Receiving and retaining information about, and treating alleged incidents involving the issuer regarding accounting, internal accounting controls or auditing matters 2. The confidential, anonymous submission of concerns by employees about questionable accounting or auditing matters Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  26. 26. 26 Barriers to Whistle Blowing Practices According to surveys more than 50% of employees in the United States do not feel comfortable using the communication channels made available to them: ­ Fear of Retaliation ­ Divided and Group Loyalties ­ Negative History & Memory ­ Logistics issues Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  27. 27. Whistle Blowing Policy   You need a Whistle blowing policy & system! Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 27
  28. 28. 28 Prerequisites for whistleblowers þ Guidance on what is right or wrong þ Confidence that they will be protected þ Must believe that appropriate action will be taken þ must be aware that they can make such a disclosure and how they should go about doing so (to whom, how, what information should be provided, etc) Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  29. 29. 29 The Code of Conduct Ethics ¤ The purpose of the “code of ethics” is to provide a VISIBLE Reference Point to DETER wrongdoing and to PROMOTE honest and ethical conduct. þ Ensure compliance with applicable governmental laws, rules and regulations þ Description of what constitutes fraudulent behavior þ Process for internal reporting of violations of the code to an appropriate person or persons identified in the code þ Define accountability for adherence to the code and the sanctions to be imposed on those who breach it Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  30. 30. 30 Fraud Reporting Channels / Hotline Leadership, Strategy & Oversight Executive Management Board of Directors Employees Internal desire to disclose fraud Audit Committee Fraud Hotline Audit Anonymity Independence Confidential Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  31. 31. Culture & Fraud Risk Management   Your corporate culture to support Good and Effective FRAUD risk management practices must have integrated the following values/principles: þ Act with Integrity and Discipline þ Be Responsible & Accountable for what they do þ Be Transparent about how they do things Ø  If it has not, Fraudulent behaviors are inevitable 31Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  32. 32. 32 The Keys Elements of Whistle blowing Policy þ Set and map the ways by which employees can make their concerns known about suspected fraud or corruption þ Outlines how the organization will deal with such instances. þ Ensure independent & Confidential investigation proceedings þ Need to protect those people who raise concerns þ Zero tolerance to fraud and corruption with tough enforcement on policy. þ It also should be linked to commitment to the development of a culture of honesty þ Develop a clear code of code of conducts & Ethics Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  33. 33. 33 In Summary, the Keys Elements of Whistle blowing Policy are.. Code of conduct & ethics Proper investigation Procedures Protection of Whistle Blower Current Profile Best Practice 1 0 8 6 4 2 0 Risk Aware Culture Tough Enforcement Reporting procedures Independent Investigation Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013
  34. 34. Marc  Ronez  -­‐  Chief  Risk  Strategist  &   Knowledge  Leader  at  ARiMI  -­‐  Asia  Risk   Management  Ins8tute   An ERM & Governance expert with 20 years of experience both as a practitioner & trainer for large MNCs, Governments & Charities. Marc has an MBA from the University of Chicago GSB, an MSc in Insurance & a LLM from the University of La Sorbonne What do I do? Help managers & leaders to use Risk Management to: þ  Resolve difficult operational and business challenges þ  Take & manage risks effectively to build sustainable & profitable growth models Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 Marc’s specific areas of expertise include ERM, risk decision-making processes, corporate governance, Business Ethics, Social Responsibility, risk-aware culture, risk communication and crisis management, business model/Strategy Risk Management, corporate learning systems development. 34
  35. 35. Risk  Management  is  a  con/nuous  journey,  not  a   des/na/on!   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 Marc Ronez is on Linked in & WordPress You can find his profile & read his blogs at: P: sg.linkedin.com/pub/marc-ronez/1/3b6/465/ B: theriskmanagementparadox.com B: riskmanagementdemystified.com 35
  36. 36.  ARiMI  –  Asia  Risk  Management  Ins8tute   Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 36
  37. 37. ARiMI  is  an  applied  research  and  business  studies  ins0tute  that   was  set  up  in  2003  (in  partnership  with  NUS)  and  has  established   itself  as  the  Ins0tute  of  Reference  for  Enterprise  Risk  Management   studies  in  Singapore  and  in  the  region.       We  FOCUS  on  programs:     1.  For  Decision-­‐Makers  (Middle  to  Top  Management):   Developing  PRACTICAL  Knowledge  &  Skills  in  Risk  &  Crisis   Management   2.  For  Organiza8ons:  Building  CAPABILITIES  for  Sustainable   and  Profitable  Growth  by  EMBEDDING  Risk  Aware  &  Crisis   Readiness  Culture   ARiMI,  Asia  Risk  Management  Ins8tute     Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 37
  38. 38.      ARiMI  -­‐  Focus  and  Exper8se   ● Crisis management & Business Continuity ● Leadership risk decision- making and Social Capital ● Reputational Risk & stakeholders management ● Corporate governance & business ethics ● Business Innovation & Corporate Transformation Research ● Professional Designation Programs CERM (Certified Enterprise Risk Manager), CPRM (Certified Professional Risk Manager), ARM (Associate in Risk Management), FSRM (Fellow in Strategic Risk Management) ● Public Seminars and Workshops ● Corporate Training & learning Programs Education ● Risks & Opportunities Assessment & Mapping ● Crisis & Business Continuity Mgt ● Reputation Risk Mgt & CSR ● Business Ethics & Fraud Risk Mgt ● Risk Appetite & Risk Aware Culture Readiness ● Project risk management ● ERM Implementation Innovation & Change Mgt Expertise Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 38
  39. 39. 39 For more information on ARiMI, check our website at: www.arimi.org Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013 Developing Effective Leaders & Decision- makers for complex & volatile times
  40. 40. Important Note: Please note that that this presentation and its contents, is the intellectual property of the Asia Risk Management Institute Pte Ltd. It has been prepared for this ASLI IA Conference 2013 session and it cannot be used for any other purposes without the specific written consent of the Asia Risk Management Institute. 40Whistle Blowing System – MARC RONEZ - Copyright @ ARiMI 2013

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