ERM: Should Internal Fraud Mitigation Top the List?

For smaller enterprises, internal employee fraud involving cash should be a very high priority focal point. For large entities, fraud considerations should focus proportionally more on management accounting practices, the potential for collusion with 3rd parties, and violations of lwas such as the Foreign Corrupt Practices Act. Non-fraud considerations should focus on procure to pay, complex areas applicable such as income tax compliance and accounting, fixed asset accvounting, debt and investment management, and inventory accounting for manufacturers, loan and loss estimation for financial institutions, and the like.

Risk oversight must start with senior executives, officers and directors. Recent reports (The Conference Board, Lehman Brothers' examiner, etc.) suggest that a failure of corporate oversight was a leading contributor to the financial crisis. Risk oversight will go nowhere within any organization, large or small, without leadership and the board getting serious about corporate oversight – governance, risk oversight and compliance. Success will require leadership and diligence, not just lip service. I suggest educating leadership and the board on exactly what risk oversight is, and why it is so important.