Tuesday, December 30, 2014

CBMK and CBMK Portal

The fundamental CBMK objective is to accumulate, structure and make available to all corporate managers and professionals worldwide all key public outer knowledge necessary and sufficient for managing all corporate objects and processes (and, obviously, for maximizing their performance) in their responsibility areas.

This knowledge includes the following components (for each corporate object):

  • Core CBMK Sections
ü  Object Management Guide
ü  Object-Related Business Processes (‘methods’)
ü  Key Performance Indicators for the object in question
ü  Frequently Asked Question about managing this object
ü  Comprehensive Business Audit Questionnaire for this object
ü  Glossary
ü  Document Templates for managing this object
  • Additional Sections
ü  Articles/papers
ü  Software for object management
ü  Books on managing the object in question
ü  Object-related case studies
ü  Experts in object management
ü  Education programs (academic and short-term)
ü  Other resources on object management
All this knowledge will be available free of charge – via CBMK Portal - to all entrepreneurs, investors, and qualified management professionals, educators and students (CBMK will make money as an advertising platform) worldwide (CBMK Portal will be offered in all major languages). A very attractive advertising platform given its audience.


It is very important that CBMK will be a dynamic, ‘live’ system as it will be constantly updated. Which will guarantee that it will always contain the most up-to-date, accurate and valuable corporate management knowledge. 

Monday, December 29, 2014

SCORE

The first stage of the strategic corporate reengineering (SCR) project requires development of a detailed description – visual and textual – of a desired (‘TO BE’) business system. The visual part of this description is a necessary and sufficient set of corporate objects (business units, brands, products, assets, clients, other stakeholders, etc.) structured with corporate object diagrams (‘maps’).

It makes sense, instead of building and structuring this set each time ‘from scratch’, to assemble it from a standard corporate objects repository (SCORE). This repository, obviously, must be developed using the best management practices (for each type of the organization and for each industry) and BDL as a description and structuring methodology.

Currently, BDL is the only workable methodology for developing a truly comprehensive and uniform SCORE for all industries and all categories of organizations. Development of an alternative methodology is a highly risky endeavor – it will either take too much time and effort or may not be feasible at all.


Therefore, for any organization – software vendor, management consultant and a business school – it makes much more sense to accept SCORE developed and offered by its owner than to try to develop a competing methodology and SCORE. Which will automatically make the original SCORE, SCORE-based software and SCORE developer a natural monopoly in all three markets – management consulting, corporate computing and corporate management education. 

Friday, December 12, 2014

SCR - Human Capital Section

Corporate Workforce
1.      Hire all necessary employees and integrate them into your corporate workforce

2.      Terminate all redundant employees

3.      Provide the necessary training, coaching, advisory, assessment and development services to your workforce

4.      Redistribute responsibility areas between your employees to provide the best match with their abilities, training, and experience
Human Capital Management System
1.      Implement the optimal corporate process for identifying and structuring the open positions

2.      Implement the optimal corporate process for identifying the optimal potential candidates for open positions

3.      Implement the optimal corporate process for hiring optimal employees for open positions

4.      Implement the optimal corporate process for integrating your employees into your workforce

5.      Implement the optimal corporate process for training, coaching, advisory, assessing and developing your employees

6.      Implement the optimal corporate process for terminating your employees
Corporate Culture and Code of Conduct
1.      Enforce the optimal corporate code of conduct developed at the ‘TO BE’ description stage

2.      Transform the corporate culture into the optimal one for your desired company (developed at the ‘TO BE’ description stage) by enforcing the corporate code of conduct
Employee Motivation System
1.      Deploy personalized and customized (to match the ‘buttons’ of individual employees) motivation systems

2.      Implement the process of continuous improvement in employee motivation systems 
Intrapreneurship
1.      Implement the process for intrapreneurial idea generation

2.      Implement the process for intrapreneurial idea structuring and description

3.      Implement the process for intrapreneurial idea evaluation (pre-implementation)

4.      Implement the process for intrapreneurial project execution


5.      Implement the process for intrapreneurial project evaluation (post-implementation)

SCR - Knowledge Management Section

Comprehensive Corporate Knowledge Base (CCKB)
1.      Set up all structured databases required by the design of the CCKB developed during the ‘TO BE’ description stage

2.      Set up all repositories of unstructured information required by the design of the CCKB developed during the ‘TO BE’ description stage

3.      Deploy all necessary ‘knowledge mining’ tools

4.      Deploy the ‘corporate cockpit’ – a uniform interface into the CCKB

5.      Provide all corporate managers and specialists with CCKB access via the corporate cockpit on a ‘need-to-know’ basis
Computer Software
Computer Software is essentially a special category of corporate tools and, therefore, must be treated and managed as such.

1.      Acquire (or develop) and deploy ‘missing’ computer software products, integrating them into your corporate software portfolio and into your business system

2.      Upgrade inefficient computer software that creates insufficient financial and aggregate value

3.      Provide valuable training and coaching to users of your computer software

4.      Replace or remove those inefficient software products that can not be upgraded with the acceptable NPV and IRR for this investment project
Computer Hardware
Computer Hardware is essentially a special category of corporate tools and, therefore, must be treated and managed as such.

1.      Acquire (or develop) and deploy ‘missing’ computer hardware products, integrating them into your corporate hardware portfolio and into your business system

2.      Upgrade inefficient computer hardware that creates insufficient financial and aggregate value

3.      Provide valuable training and coaching to users of your computer hardware

4.      Replace or remove those inefficient hardware products that can not be upgraded with the acceptable NPV and IRR for this investment project
Corporate Intranet
Corporate Intranet is essentially a tightly integrated portfolio of corporate software tools and, therefore, must be treated and managed as such.

1.      Acquire (or develop) and deploy ‘missing’ Intranet components, integrating them into your corporate Intranet and into your business system

2.      Upgrade inefficient Intranet components that create insufficient financial and aggregate value
3.      Provide valuable training and coaching to users of your corporate Intranet

4.      Replace or remove those inefficient Intranet components that can not be upgraded with the acceptable NPV and IRR for this investment project
Best Management Practices
Best Management Practices make an important component of the comprehensive corporate knowledge base (CCKB) and, therefore, must be managed and treated as such.

1.      Fill in the database of best management practices

2.      Deploy the best management practices

3.      Monitor adherence to the best management practices

4.      Implement the system for identifying, locating, storing, structuring and adopting the best management practices in your company

SCR - Communications Section

Communications section covers (a) ‘permanent’ corporate communication channels – such as your corporate Web site, your mobile applications, your corporate Twitter account, etc.; and (b) your corporate communication campaigns – on TV, in print media, on the Internet, etc.

Both communication channels and communication campaigns are essentially a special category of corporate projects and, therefore, must be treated, managed and reengineered as such.
Corporate Communication Channels
1.      Add ‘missing’ financially valuable communication channels

2.      Restructure communication channels that do not create financial and aggregate value

3.      Close communication channels that can not be restructured with acceptable NPV and IRR for the restructuring project
Corporate Communication Campaigns
1.      Add ‘missing’ financially valuable communication campaigns

2.      Restructure communication campaigns that do not create financial and aggregate value


3.      Terminate communication campaigns that can not be restructured with acceptable NPV and IRR for the restructuring project

SCR - Operations Section

Corporate Projects
1.      Add financially valuable projects to your corporate projects portfolio

2.      Terminate corporate projects that make no financial or economic sense (or just do not meet the new project acceptance requirements)

3.      If necessary, restructure corporate projects to maximize financial and aggregate value generated by these projects
Corporate Processes
1.      Add financially valuable processes to your system of corporate processes

2.      Eliminate corporate processes that make no financial or economic sense (in other words, destroy financial value)

3.      If necessary, restructure corporate processes to maximize financial and aggregate value generated by these processes
Corporate Tools
1.      Acquire and deploy ‘missing’ corporate tools, integrating them into your corporate tools portfolio and your business system

2.      Upgrade inefficient corporate tools that create insufficient financial and aggregate value

3.      Remove those inefficient corporate tools that can not be upgraded with the acceptable NPV and IRR for this investment project
Corporate Risk Management System

1.      Implement corporate risk management system designed at the previous stage (description of the ‘TO BE’ condition)

SCR - Marketing Section

Competencies & Advantages
1.      Add (develop or acquire) missing core competencies

2.      Add (develop or acquire) missing competitive advantages

3.      Implement efficient competition intelligence system
Target Markets
1.      Add ‘missing’ target markets

2.      Remove inefficient target markets that make no financial or economic sense

3.      Restructure existing target markets portfolio (e.g. by redefining target markets)

4.      Implement efficient target markets intelligence system
Corporate Brands
1.      Add ‘missing’ corporate brands

2.      Remove inefficient brands that make no financial or economic sense

3.      Restructure existing corporate brands to maximize their financial value

4.      Implement developed UVP in your corporate brands
Corporate Products & Services
1.      Add ‘missing’ corporate products & services

2.      Remove inefficient products & services that make no financial or economic sense

3.      Restructure existing corporate products & services to maximize their financial value


4.      Implement developed UVP in your corporate products & services

SCR - Organizational Structure

Business Units
1.      Add (create or acquire) missing business units to your business system
2.      Remove redundant business units from your business system
3.      Restructure (reengineer) poorly structured business units

Regional Branches
1.      Add (create or acquire) missing branches to your business system
2.      Remove redundant branches from your business system
3.      Restructure (reengineer) poorly structured branches
Retail Locations
1.      Add (create or acquire) missing locations to your business system
2.      Remove redundant locations from your business system
3.      Restructure (reengineer) poorly structured locations
Internal Value Centers (IVC)
1.      Add (create or acquire) missing IVC to your business system

2.      Remove redundant IVC from your business system

3.      Restructure (reengineer) poorly structured IVC
Functional Units
1.      Add missing functional units to your business system

2.      Remove redundant functional units from your business system

3.      Restructure (reengineer) poorly structured functional units

4.      Restructure the whole system of functional units
Workgroups
1.      Add missing workgroups to your business system

2.      Remove redundant workgroups from your business system

3.      Restructure (reengineer) poorly structured workgroups
Legal Entities
1.      Add (create or acquire) missing legal entities to your business system

2.      Remove redundant legal entities from your business system


3.      Restructure (reengineer) poorly structured legal entities

SCR - Financial Section

Again, most of the SCR in these section has already been accomplished at the ‘TO BE’ description stage. Essentially, you have only one thing left – implementing the comprehensive (but lean!) corporate budgeting system aimed at maximizing the financial value and aggregate corporate performance of your company.

SCR - Strategic Section

Most of the SCR in these section has already been accomplished at the ‘TO BE’ description stage. Only a couple of things remain to be done:

1.      Implement corporate process for monitoring you key external factors (KEF) and utilizing them in your strategic corporate management process


2.      Develop detailed corporate strategic plans – financial, operational and business plan (by integrating individual object performance maximization plans developed during ‘TO BE’ description stage)

SCR - Structural Section

1.      Add (create or acquire) missing corporate objects to your business system

2.      Remove redundant corporate objects from your business system

3.      Add (create or acquire) missing corporate processes to your business system

4.      Remove redundant corporate processes from your business system

Thursday, December 11, 2014

Key Steps in Your SCR Project

Implementation of your SCR project takes similar steps to describing your ‘AS IS’ and ‘TO BE’ situation. These steps are broken down into the same ten sections:

1.      Structural section

2.      Strategic section

3.      Financial section

4.      Organizational structure

5.      Stakeholders section

6.      Marketing section

7.      Operations section

8.      Communications section

9.      Knowledge management section

10.  Human capital section


Like the ‘AS IS’ description (and unlike ‘TO BE’ description), these stages must be undertaken concurrently (to save valuable time). The key coordination tool is, obviously, the comprehensive corporate objects map (CCOM) and its decomposition diagrams. 

SCR Deliverables

SCR essentially produces just three deliverables:

1.      The desired company itself, reengineered according to blueprints developed at the ‘TO BE’ description stage

2.      Detailed description of actual desired company which is usually somewhat different from the blueprints (unlike in the aircraft world, in the business world it is quite typical)

3.      Detailed financial and operational plans for the development of a kaizen system which formally is not a part of an SCR project

‘TO BE’ Description Procedure

‘TO BE’ description procedure is a much simplified version of the procedure for describing the ‘AS IS’ condition:

1.      Assemble the core team for the procedure. This team will include both external consultants and corporate top managers and will be present at all brainstorming sessions

2.      Define the teams for each brainstorming sessions. Obviously, the full team for designing the product portfolio will be different from the one designing the comprehensive corporate knowledge base

3.      Develop the procedures for brainstorming sessions. Each session must deliver the description of the corresponding simple object, composite object or objects portfolio

4.      Develop the schedule for brainstorming sessions. Given that corporate managers and employees have responsibilities outside the CBA project, one two-hour session is probably the ‘natural limit’ here

5.      Execute brainstorming sessions

6.      Present deliverables to the ‘top brass’ – owners, Board of Directors and CEO – for approval

'TO BE' Intrapreneurship

1.      Develop a comprehensive system of motivation for intrapreneurial idea generation
2.      Develop a comprehensive system for intrapreneurial idea description
3.      Develop a comprehensive system for intrapreneurial idea evaluation
4.      Develop a comprehensive system for intrapreneurial project implementation

5.      Develop a comprehensive system for post-implementation evaluation of intrapreneurial project

'TO BE' - Employee Motivation System

1.      Develop a comprehensive (but lean) core for your employee motivation system (including both financial and non-financial components)


2.      Develop a comprehensive procedure for personalization and customization of the core (standard) motivation system to the specific ‘buttons’ of individual employees

'TO BE' - Corporate Culture and Code of Conduct

1.      Develop a comprehensive (but lean) description of optimal corporate culture focused on maximization of financial and aggregate value and overall corporate performance

2.      Develop a comprehensive (but lean) corporate code of conduct focused on maximization of financial and aggregate value and overall corporate performance

3.      Develop a comprehensive and detailed procedure for discovering the actual corporate culture
4.      Develop a comprehensive and detailed procedure for engineering the optimal corporate culture


5.      Develop a comprehensive and detailed procedure for developing and implementing the optimal code of conduct

'TO BE' - Human Capital Management System

1.      Develop a comprehensive system for identifying prospective employees (candidates for open positions)

2.      Develop a comprehensive system for hiring employees

3.      Develop a comprehensive system for integrating and adapting employees

4.      Develop a comprehensive system for utilizing employees (getting the most out of them in terms of financial and aggregate value)

5.      Develop a comprehensive system for training, coaching and developing employees


6.      Develop a comprehensive system for terminating employees

'TO BE' - Corporate Employees

1.      Develop a comprehensive (but lean) list of corporate responsibility areas (with detailed descriptions)

2.      Develop a comprehensive (but lean) list of corporate positions (with detailed descriptions) based on these responsibility areas

3.      Develop an optimal assignment of existing corporate employees to these positions

4.      Develop a detailed list of vacant positions to be filled


5.      Develop an efficient process for repeating steps (1) through (4) for each new responsibility area and position

'TO BE' - Knowledge Management Section

1.      Develop a detailed description (visual diagram + textual description) of the comprehensive (but lean) corporate knowledge base (CKB proper + its interface – ‘corporate cockpit’)

2.      Develop a detailed description (visual diagram + textual description) of the comprehensive (but lean) corporate hardware system

3.      Develop a detailed description (visual diagram + textual description) of the comprehensive (but lean) corporate software system

4.      Develop a detailed description (visual diagram + textual description) of the comprehensive (but lean) corporate Intranet
5.      Develop a comprehensive list of best management practices

6.      Develop a comprehensive system for identifying and adopting best management practices within your organization

'TO BE' - Communications Section

Communications Channels
1.      Develop an optimal portfolio of corporate communication channels (in terms of financial value maximization) – Web site, social networking presence, mobile apps, etc.

2.      Develop comprehensive (but lean!) KPI system (financial and operational) for each of these channels

3.      Set up planned KPI values with exactly right degree of ‘stretch
Communications Campaigns
1.      Develop an optimal portfolio of corporate communication campaigns (in terms of financial value maximization) – TV, radio, magazines, Web sites, etc.

2.      Develop comprehensive (but lean!) KPI system (financial and operational) for each of these campaigns


3.      Set up planned KPI values with exactly right degree of ‘stretch

'TO BE' - Operations Section

Corporate Processes
1.      Develop a comprehensive map of all corporate processes (‘methods’) attached to the appropriate objects (in full compliance with object-oriented approach)

2.      Visualize the optimal structure of all these corporate processes (using IDEF0 diagrams), including subprocesses, inputs, outputs, controls, tools and personnel

3.      Develop comprehensive (but lean!) KPI system (financial and operational) for each of these processes

4.      Set up planned KPI values with exactly right degree of ‘stretch
Corporate Projects
1.      Develop an optimal portfolio of corporate projects (in terms of financial value maximization)

2.      Develop comprehensive (but lean!) KPI system (financial and operational) for each of these projects
3.      Set up planned KPI values with exactly right degree of ‘stretch 
Corporate Tools
1.      Develop an optimal portfolio of corporate tools (in terms of financial value maximization)

2.      Develop comprehensive (but lean!) KPI system (financial and operational) for each of these tools

3.      Set up planned KPI values with exactly right degree of ‘stretch
Corporate Risk Management System
1.      Develop a comprehensive (but lean) list of all or your significant corporate risks

2.      Develop a comprehensive system for preventing these risks from happening (‘disaster prevention’)


3.      Develop a comprehensive system for recovering from these risks happening (‘disaster recovery’)

'TO BE' - Marketing Section

1.      Define the optimal portfolio of target markets (in terms of financial value generating potential)

2.      Develop the optimal unique value propositions (UVP) for all of your key stakeholders, making sure that these UVP match your marketing strategies and are superior to UVP offered by your direct and indirect competitors

3.      Describe the optimal set of core competencies that your company needs to maximize its financial and aggregate value

4.      Describe the optimal set of competitive advantages that your company needs to obtain overall superiority over its competition

5.      Define the optimal portfolio of corporate brands that will generate the maximum financial value for your company


6.      Define the optimal portfolio of corporate products & services that will generate the maximum financial value for your company

'TO BE' - Stakeholders Section

1.      Assemble the optimal portfolio of stakeholders (where you have the choice, obviously) that will create the maximum possible amount of financial and aggregate value for your company


2.      Develop the optimal stakeholders’ relationship management (SRM) system that will ensure the harmony between your company and its stakeholders (in terms of aggregate value generation)

'TO BE' - Organizational Structure

1.      Develop an optimal (comprehensive and lean) system of [strategic] business units


2.      Develop an optimal (comprehensive and lean) system of regional branches
3.      Develop an optimal (comprehensive and lean) system of retail locations
4.      Develop an optimal (comprehensive and lean) system of internal value centers
5.      Develop an optimal (comprehensive and lean) system of functional units (departments)

6.      Develop an optimal (comprehensive and lean) system of workgroups

7.      Develop an optimal (comprehensive and lean) system of legal entities

Financial Section

1.      Select the optimal financial accounting and reporting standards – GAAP or IFRS

2.      Develop optimal financial accounting and reporting system that (a) fits the requirements of selected standards; and (b) supplies the corporate decision-makers with the necessary knowledge (eliminating the ‘BAAP effect’)

3.      Develop the optimal system of financial statement items and financial ratios for efficient evaluation of your corporate financial performance

4.      Develop the proper procedures for visualizing, measuring, managing and optimizing business- and operational reality behind the numbers on financial statements and values of financial ratios

5.      Develop an optimal corporate budgeting system that maximizes the efficiency of measuring, managing and maximizing financial value of your company

6.      Develop an optimal cost accounting system that allocates costs to your corporate objects and processes in the most natural way


7.      Develop an optimal tax accounting system that (a) minimizes your corporate tax expenses and (b) keeps you out of legal trouble

'TO BE' - Strategic Section

1.      Develop a detailed and optimal corporate governance system that will ensure making the best possible decisions and the most efficient execution of these decisions

2.      Develop a comprehensive (but lean!), accurate and well-structured narrative of your corporate history and the procedures for using your history in your strategic planning and overall strategic management process

3.      Develop a comprehensive (but lean!) system of key performance indicators (KPI) for your corporate objects and processes. Essentially, the KPI database supported by the appropriate KPI trees
4.      Develop a comprehensive (but lean!) system of your key external factors (KEF) and an efficient methodology and process for monitoring these factors and using them in your strategic corporate management process

5.      Develop a comprehensive (but lean!), accurate, logically sound and emotionally powerful declaration of corporate identity (DCI). Make sure that it matches your corporate history and your KEF

6.      Develop a comprehensive (but lean!), realistic (with just the right degree of ‘stretch’), logically sound and emotionally powerful corporate mission and vision statements. Make sure that they match your corporate history, your KEF and your DCI

7.      Develop challenging (but sound) strategic corporate objectives – both financial (financial value, free cash flow, ROIC and economic profit) and non-financial (market shares, etc.). Select the optimal monetization method for your financial value – IPO, strategic sale, dividends, etc. Make sure that these objectives match your KEF.


8.      Develop a comprehensive set of your corporate strategiesgeneral and functional (marketing, financial, operational, communication, geographic, risk management, human capital management and information/knowledge management). Make sure that these strategies are a good fit for each other and that they match your KEF, your DCI and your corporate mission and vision statements

'TO BE' - structural section

1.      Develop a comprehensive corporate objects map for your ‘TO BE’ situation – starting with CCOM and including all object decomposition diagrams. This will visualize all your desired corporate objects


2.      Develop a comprehensive map for all your key corporate processes. Attached to the appropriate objects, of course – in full compliance with the object-oriented approach

Key Steps in Describing ‘TO BE’ Situation

Describing your ‘TO BE’ situation takes similar steps to describing your ‘AS IS’ situation. These steps are broken down into the same nine sections:

1.      Structural section

2.      Strategic section

3.      Financial section

4.      Stakeholders section

5.      Marketing section

6.      Operations section

7.      Communications section

8.      Knowledge management section

9.      Human capital section

Unlike the ‘AS IS’ description (which can and must be done concurrently after the Structural Section), the ‘TO BE’ description is done consecutively, using the ‘AS IS’ description and the description of your ‘ideal company’ as two starting points.

As most obstacles and limitations are inside you, not outside, you can expect your ‘TO BE’ (desired) condition of your business entity to be much closer to your ‘ideal company’ than to your actual situation.  

It must be noted that the description of your ‘TO BE’ condition already includes some elements of a formally subsequent stage in your quantum leap project – strategic corporate reengineering (SCR). Why? Because it includes development not only of blueprints for the desired objects, but of some of the objects themselves (DCI, corporate mission and vision statements, corporate strategies, etc.)

‘TO BE’ Description Components

Description of the desired (‘TO BE’) situation is structurally identical to the description of your current (‘AS IS’) situation and consists of the following components:

1.      A comprehensive system of corporate object maps (CCOM and decomposition diagrams), that visualize all desired key corporate objects and structure them into a coherent system
2.      A comprehensive system of IDEF0 diagrams, that visualize all desired key corporate processes and structure them into a coherent system. As BDL is an object-oriented language, these processes (‘methods’) are attached to the corresponding objects

3.      A comprehensive database of desired corporate objects, which includes object descriptions, valuation models, decomposition diagrams (if applicable), KPI values, performance scores, aggregate performance indices, ACRC and links to all object-related corporate documents. This database is accessed – obviously – via object scorecards (APS and KPIS)

4.      A comprehensive database of desired corporate processes, which includes process descriptions (including subprocesses, inputs, outputs, controls, tools and personnel), valuation models, decomposition diagrams (if applicable), KPI values, performance scores, aggregate performance indices, ACRC and links to all process-related corporate documents. This database is accessed – obviously – via process scorecards (APS and KPIS)


5.      Final object- and process improvement plans (financial and operational) integrated into the preliminary company-wide improvement plan

CBA - Investigating ‘On-the-Job’ Crimes

The issue of ‘on-the-job crime’ (crimes committed by corporate employees or stakeholders such as clients or suppliers) is a highly sensitive issue that is usually left outside of the scope of a comprehensive business analysis. Which is not a good idea at all.

Why? Because these crimes have a significant and obviously very negative impact on corporate profits, cash flows and financial value.

The most recent edition of The Association of Certified Fraud Examiners (ACFE) “Report to the Nations on Occupational Fraud and Abuse,” issued in 2012, states that the median loss of each instance of employee fraud in their study was $140,000. More than one-fifth of these cases caused losses of at least $1 million. Even in a large, multi-billion dollar organization, that amount is significant.

In addition to purely financial losses, there is usually another negative impact, potentially even more serious, resulting from both internal and external awareness of repeated instances of fraud. Internally, this can lead to low morale and a “me-too, as everyone else is doing it” mindset. Which results in escalating fraud, theft and, therefore, in higher and higher financial losses. Externally, it can significantly damage an organization’s brand and reputation.

Even in a generally well-run company, fraud still takes place. According to the abovementioned 2012 ACFE report, an average organization loses 5% of its revenues to fraud — a staggering sum.

Unfortunately, few companies take the problem of on-the-job fraud seriously enough. Some simply ignore this issue, pretending that these crimes only happen elsewhere. Others rely solely on ethical policies (code of conduct), employee background checks and seemingly well-designed corporate financial and operational controls.

However, these safeguards (which must be an integral part of every corporate risk management and loss optimization system), is usually not enough. The reality is that people are fallible and there is always going to be at least one bad apple. Policies and codes of conduct will be ignored, and controls are never perfectly effective.

Therefore, you will simply have to include on-the-job crime investigation (activities that look specifically for on-the-job crime) into your CBA project. Which, obviously, requires bringing to the CBA team outside professionals highly competent and experienced in such investigations (usually they have some law enforcement background).

Where to look? Within the company, on-the-job crime tends to concentrate in the procurement, payment and expense areas. Externally, a going threat is an online crime (which can be external as well) – theft of money and valuable information, identity theft and so one. Investigating for these will obviously require services of experts in online crime investigation.

Top five areas of employee theft (according to John Verver - vice president at ACL, an audit and risk management technology solutions firm):

1.      Purchase-to-Pay. Potential fraud risks include (a) an employee initiating purchase orders (P.O.) for goods and services that are diverted for personal use and (b) an employee setting up a ‘phantom’ vendor account, through which fraudulent invoices are processed and payments are made to the employee.

2.      Corporate Credit Cards. A common fraud risk occurs when an employee uses a corporate credit card for personal gain instead of legitimate corporate purchases or travel and entertainment expenses.

3.      Payroll. Payroll fraud can consist of (a) ‘phantom’ employees being set up on payroll systems; (b) excessive overtime payments; and (c) employees remaining on the payroll after death or termination.

4.      Sales and receivables. Most common thefts include (a) employee collusion with vendors and (b) sales representatives inflating sales to achieve higher commissions and bonuses.


5.      Information systems and critical data. This kind of fraud includes (a) internal or external theft of money from corporate bank accounts using computer software and online tools; (b) employee theft of critical data and (c) employees providing corporate data to external individuals – competitors, hackers, etc. - or criminal organizations.