How forensic will help keep your business “healthy”.

Each company- in a metaphorical sense- is an integral organism with separate organs, heart, circulatory, nervous and respiratory systems.

In a real situation, organs are departments of the company:

  • purchasing department;
  • • accounting/financial department;
  • • production;
  • • legal department;
  • • commercial department;
  • • HR department;
  • • IT department and other structural divisions.
  • In order for the organism to live an exciting, full of impressions life to the fullest, while maintaining the health of all its organs, it needs to provide proper healthy nutrition, intellectual development, regular exercise and give up on bad habits.
  • The owner of the business, in this case, can be called the brain; he, first of all, decides what is good for his organism, and what is bad, what actions will develop his organism, and what, on the contrary, will be harmful. Cash flow, I would say, is the circulatory system, without which the company could not function, as lack of financial flows leads to the death of the organism. Assets can be considered as locomotor system, because this is the basis of the company’s production activity (if we are talking about an enterprise, that creates certain material goods). In the case of a company, the product of which is intellectual property, its asset is the intellectual potential in the form of the employees.
  • The liver and the kidneys are the security and legal departments, which are always on guard to protect the health of the organism, helping to filter the unreliable partners, contractors and “toxic” deals.
  • Any organism needs a regular check up and preventive measures in order to detect and diagnose viruses, diseases and illnesses in a timely manner. If any abnormalities are detected, surgical treatment is necessary. In real life, by diagnostics, I mean conducting an annual audit of company’s financial statements, the purpose of which is to increase confidence and determine its reliability, as well as to identify violations and inconsistencies in accounting.
  • Forensic I would call a comprehensive diagnostics of the organism’s systems in order to determine the red flag factors, that could lead to the failure of its work, and in case of identification of potential problem spots- to their immediate correction.
  • In business, as in health care, it is important not to lead to pathologies, namely, situations, when it is too late or difficult to save the organism and always, without exception, with operative measures.
  • Fraud statistics among Ukrainian companies show shocking numbers, that have been taken outside the business perimeter, past the owner. Very often it is tens of millions, and sometimes even hundreds of millions. Even more often, the time factor is not playing into the hands of the owners, that is why a timely decision to initiate the forensic procedure is very often literally worth the saved millions of dollars.
  • Among the tools for diagnosing and controlling the business within the framework of forensic procedure, we can highlight:
  • forensic check (red flag report)- analysis of the main business clusters in the context of major departments by means of 3 types of inspections: legendized, spontaneous and direct;
  • whistle blowing system- a feedback system for notification of fraudulent cases in the company;
  • 4 eye principle- the principle of four eyes (a rule, that requires at the closing of the important deals the signatures of not one, but at least four people, who are part of the company’s management. This is necessary in order to ensure the maximum impartiality of the agreement;
  • OSINT/HUMINT (corporate intelligence)- analysis of the external and internal information field of the company.
  • Conclusion
  • Timely diagnosis of the problem is the key to its successful elimination, in this case the forensic tool plays the role of an antibiotic, the effect of which is tough, effectively helping not only to eliminate the symptoms of the disease, but to cure and prevent the occurrence of the disease in the future.

Stay alert…

Auditor, Fraud investigator Co-Owner, Partner, Forensic services at Crowe Erfolg Site: Member ASIS, ACFE, ASCP Board member GS