Reflections on the changing nature of the Forensic landscape
Forensic Foresight: July 2016
Chris Noble, the Deloitte Forensic Lead Partner in Australia, introduces this edition by reflecting on the changing nature of the Forensic landscape and how the practice is changing to assist our clients in navigating ‘wicked’ problems and to keep up with stakeholder expectations.
When I reflect on the last 3 years I see that our Deloitte Forensic team has been working with our clients on increasingly complex and ambiguous problems. We continue to help resolve challenges that typically involve combinations of claims of market fixing, collusion, systemic fraud, money laundering, corruption, and/or major conflict and dispute between parties. We are also increasingly being asked, particularly in the public sector, to diagnose the root cause of major program or initiative failures where substantial value has been lost. The themes are not new but the context and environment has changed so drastically to the point of disrupting known traditional problem solving approaches.
Wicked problems and stakeholder expectations
Some matters still tend to be clear cut in terms of how to respond, but increasingly for particular organisations, and in some cases entire sectors, the challenges we see are akin to wicked problems - problems that are difficult or almost impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognise. A contemporary example is the threat of foreign governments and crime gangs conducting cross border cyber-attacks on Australian business.
In 2016 we face unprecedented expectations by community stakeholders, enabled by real time openness and access to information that comes with 24/7 media including social media. Transparency is now demanded in Australia. A company’s reputation can be materially affected in almost an instant.
In this multifaceted, technology–enabled and dynamic context, invariably we have conflict between stakeholder groups, particularly when only a short term lens is applied. An increasingly common dilemma is the perceived misalignment of interests between shareholders and customers which brings us to conduct risk.
In 2016 regulators, customers, employees and the market are unforgiving of organisations seen to be conducting themselves inappropriately or unethically or against their interests.
The circumstances that get our clients into damaging situations invariably tie back to the conduct of people in those organisations. ASIC are campaigning hard in the market on conduct risk – the risk of inappropriate, unethical or unlawful behaviour on the part of organisation’s management or employees.
The era of transparency means questionable conduct surfaces more quickly and has a far more damaging impact to organisations than ever. It is critical that leaders understand conduct vulnerabilities and take proactive steps to address them before systemic issues arise. This requires a review of product and service design and suitability, ongoing monitoring and supervision, incentive and performance frameworks, profit drivers and cultural norms. Appropriately prioritised and backed by leaders, such a review can prevent significant conduct risk costs whilst also identifying customer improvement opportunities.
The value Deloitte Forensic has provided to clients has been twofold:
- Firstly in the rapid response to damaging events, our role has been to calmly and precisely piece together the facts around a circumstance to best inform our client. This has enabled timely and improved decision making and helped with honest negotiation with stakeholder groups such as regulators, customers, employees and the market. Research has shown that timely and effective response by listed companies that face crisis events has improved shareholder value over the medium term compared to those that do not respond quickly.
- Secondly we help clients to design and execute on plans to deal with threats particularly related to financial crimes not least fraud, corruption, money laundering and terrorist financing. This is the advisory component of our business and is laden with data and technology advisory solutions.
Where the challenges are particularly complex, we have been combining with a range of experts and advisors from medical, social, ethical, economic, technological, and /or political backgrounds to resolve ambiguous and wicked problems. New ways of thinking are often needed to deal with these ambiguities. We are lucky to be part of a very large global network of firms with a wide base of knowledge but we also have an even more extensive network of contacts and alliances to bring to bear to take on wicked challenges.
Forensic as a Managed Service
Given the fast paced changing environment, Deloitte Forensic is increasing providing Forensic as a Managed Service to serve those clients that want assured but also flexible access to the capabilities and tools without investing in-house or trying to keep up with the pace. In many organisations Forensic is not a core competency required in their business.