Last week, I shared some of our thoughts here at Hillard Heintze on the Top Trends to Watch in 2014 regarding security risk management and the challenges we think business leaders will confront this year.  This week, I want to shift gears and touch on another crucial area for business leaders – and the Top Trends we see unfolding in corporate investigations, particularly with respect to the work we do related to supporting character, integrity and ethics matters in complex organizational environments.  Here are three of the trends we are tracking as the year unfolds.

Trend #1: Not a Good Time to Cut the Fraud, Waste and Abuse Budget

A major driver of corporate investigations in 2014 will be employee conduct matters, as well as fraud and embezzlement.  While the drumbeat of business headlines speak for themselves, we also see an elevation in concern at the board level among our own clients about fraud, waste and abuse issues that, in the past, were comfortably delegated to the General Counsel’s Office or the Director of Security.  We see a similar trend among faith-based organizations, many of whom represent long-standing clients of our firm. What’s driving this focus?  Many factors.  One is social media – and the fact that corporate reputations can be damaged in minutes.  Another is the cocktail of bad judgment some people are attracted to when the three pillars of the fraud triangle – pressure, opportunity and rationalization – are combined.[1]  And a third is the economy.  Stock markets are up.  Corporate profits are climbing again.  This is a time, according to some experts, when scrutiny can taper off, corporate resources get remapped to new businesses, and rates of fraud, waste and abuse can begin to rise.

Trend #2:  “IT Is On Line 1. And HR Will Call You Back.”

Another trend we see emerging this year in corporate investigations is increased collaboration and information sharing between corporate investigative units and other departments.  Many of the corporate security and investigative programs that we support don’t do a good enough job at “connecting the dots” across in-house sources of support, information sharing and intelligence. Why?  A common reason is technical disconnect between case management databases and incident reporting systems.  Another is a dysfunctional organizational chart that aligns various corporate investigative “war rooms” with different executive champions.  A third is a recent history of mergers and acquisitions – and a “bolt-on” approach to merging investigative teams, capabilities and infrastructure.  What hurts companies is that the department heading up the investigation – whether it is General Counsel, Corporate Security, HR, Compliance, Risk Management, Audit or one of the business lines – often finds a way to “get the job done.”  Investigative leads and evidence missed go unnoticed.  Red flags don’t wave.  Obstacles and inefficiencies continue.  What should you do?

  • Strategic Assessment: Conduct an enterprise-wide assessment of investigative protocols and practices.  Or focus narrowly on one department and be ready to follow the bread crumbs to departments headquartered across the suite.
  • Database Integration: Consolidate databases with key investigative data – and you’ll get far better insights – and maybe even some procurement savings.
  • Organizational Realignment: Fix the org chart.  Align reporting channels with your investigative priorities and resources.
  • Establish an Internal Review Board: Assemble the stakeholders of your corporation’s investigative programs and outputs together at least quarterly.  Listen.  Share.  Identify best practices.  Define actions.  Initiate change.
  • Technology: Keep your eye on this constantly or task your security and investigative team with doing so.  It’s changing the face of corporate investigation processes – especially internal and external collaboration and information sharing – in little ways and large, every day.

Trend #3: From Caracas to Shanghai

Another key trend in corporate investigations we believe will impact businesses in 2014 is a growing focus on international investigations.  Yes, the international business, economic and social regulatory market has been intensifying for years.  And companies worldwide have invested extensively in controls and countermeasures.  But international economic crimes and rackets remain a major risk to some organizations and other factors are increasing the stakes.  One is that oversight is thinner in emerging markets and far-flung segments of the global supply chain.  Another is that average loss per company in some industries has risen over the last several years.  We see this priority increasing for U.S. multinationals with new operations in emerging markets, such as Mexico, Venezuela, the Middle East, Russia and China, as well as for global firms with a growing number of investigations that cross international boundaries. Which investigative priorities will you be focusing on in 2014? What investigative priorities are top of mind for you this year?  What changes in approach are you considering to address these?  Where are you concentrating your resources? (This blog is part of a series that Hillard Heintze executives and experts are authoring throughout January 2014 on the Top Trends to Watch in 2014 in three discrete areas: (1) security risk management, (2) investigations, and (3) ethics, integrity and law enforcement program improvement. These will be published on Tuesday and Friday of each week in January. Want an automatic alert when the next blog goes up? Take a moment and subscribe to The Front Line).

[1]  Donald R. Cressey, Other People’s Money (Montclair: Patterson Smith).