Fraud and other risks: Managing a crisis to save your company's reputation

More effort toward preventing fraud

With allegations of fraud at high-profile companies as the US government emphasizes enforcement of the Foreign Corrupt Practices Act (FCPA) in recent years, the introduction of the UK Bribery Act, and new SEC whistleblower rules, directors are increasingly concerned about fraud:

• Nearly half of directors (46%) say their boards have held additional discussions about the “tone at the top” of the company as part of their focus on mitigating fraud risks.
• Thirty-eight percent increased the time spent on discussing risks embedded in compensation plans.
• Thirty-one percent have interacted more frequently with members of management below the executive level.

Which of the following has your board done in the last 12 months to reduce fraud risk?

Crisis management concerns come and go

An effective crisis management plan is essential to a company’s overall approach to risk management and business continuity:

• A crisis can impede a company’s ability to do business, damage its reputation, and give directors a “black eye.”
• The 24-7 news cycle and social media drastically increase information sharing, allowing customers, shareholders, regulators, and the public to immediately form an opinion of the company’s response to a crisis.
• Fifty-seven percent of directors are not comfortable with their understanding of the company’s social media crisis response plan. History shows companies that communicated poorly during crisis situations experienced significant damage to their brands and financial results.

In the last 12 months, has your board discussed management’s plans to respond to a major crisis?

What else did directors reveal?

• Only two-thirds of directors (67%) discussed the company’s crisis management plan during the last 12 months, whereas 82% had such discussions in the prior year study.
• Thirty-seven percent of directors would like to increase their time spent on this topic in the future.
• Seventy-nine percent of directors at the largest companies discussed the crisis response plan in the last 12 months, compared to 66% at smaller companies.