By Stephen Shepherd, Marketing –
This week in marketing class we reviewed the fraud triangle, a model that illustrates the key factors required for fraud to occur: pressure, opportunity and rationalization.
To Give an Example
Let’s say a trusted employee is tempted to embezzle a certain sum of company funds to make ends meet at home. “The company owes me money anyway,” he rationalizes. “Nobody will notice.” Then, the window of opportunity cracks open and he dives through headfirst, initiating an incident that could have been avoided by his keeping the window shut with the lock of integrity.
Many professionals are familiar with this model and agree that eliminating opportunities should be a firm’s primary strategy in reducing corporate fraud. Most would also agree that it is virtually impossible, as opportunities to be dishonest are nearly always present.
A Case Study Regarding Fraud
Scientist Dong-Pyou Han recently resigned from Iowa State University after admitting to a multi-million dollar case of fraud. As a tech performing AIDS vaccine trials on rabbits, he allegedly spiked the bunny blood with human antibodies in an attempt to produce favorable results. Beyond purportedly manipulating the experiment, he is being charged with falsifying reports that helped his team earn federal research grants worth millions of dollars.
Han’s actions went unnoticed until a fellow scientist began to question the team’s success and reported his suspicions to the team leader. But it was too late; Han had already squandered the federal funding (our taxes) and tainted the university’s reputation.
Opening the Window
It’s not very often you hear of scientific scams (at least when you compare it to politics). This example demonstrates that fraud happens in even the more unlikely of circumstances. One needs not open very wide the window of opportunity before an organization’s profits and reputation sneakily and swiftly slip out.
We can minimize opportunities. We can decrease negative pressure on employees. However, we ourselves cannot eliminate rationalization from the fraud triangle. It is the only factor that lies at the heart of the problem and in the mind of each individual employee. How can we influence them to rationalize ethical behavior?
Perhaps your company has an “integrity triangle” to counter the effects of the fraud triangle. What key factors are required for honesty to occur?