As the economy declines, both in Canada and globally, new threats emerge. The recent collapse of certain investment schemes illustrates how allegations of fraud, previously undetected, emerge from the shadows. Possibly the only positive aspect of the credit crunch is that, as providers of finance retrench and seek return of loan finance or investment capital, fraudulent borrowing or fraudulent investment management is revealed, thereby capping the losses that have occurred.
When economic survival is threatened (either for the organization or for the individual) the line separating acceptable and unacceptable behaviour can, for some, become blurred. In addition, criminal organizations that profit from fraud view the current economic conditions as an opportunity, not a threat.
This paper considers whether fraud and integrity threats are changing during this period of economic decline and, if so, how. Looking forward, we consider the issue that boards of directors and audit committees need to be aware of in 2009: the frauds that may emerge and the likely regulatory response. Finally, we describe the strategies enlightened organizations are implementing to manage short term risks and to enhance stakeholder value in the longer term.