All posts by john

To manage the risk of fraud, is honesty the best policy?

Do you encourage honesty among your employees?

Fraud occurs where employees or others lack honesty.  I have written several times about various ways you can protect your business against fraud. Barry Zalma’s Insurance Fraud Letter has provided many examples of frauds and has shown that anti-fraud measures pay for themselves.  I recently advised you to involve employees and others as allies against fraud, but now you need to think about one other important individual. Yourself!

How does your own honesty affect others?

Most of us believe that two wrongs don’t make a right. Yet many people think they are justified in defrauding someone if they consider him or her to be dishonest. Even people who wouldn’t defraud you might not be quick to expose someone else’s fraudulent activity, if they think you are getting your just deserts.

Where does your honesty show in your business?

Are you honest and transparent in your dealings with:

  • Clients?
  • Prospects?
  • Partners and colleagues?
  • Employees?
  • The public?
  • Regulators?
  • The taxman?

Employees notice, and they develop an image of you and the business, which affects how they treat you.

Is honesty the same as openness?

Not necessarily, but I mentioned openness because people’s perception of you matter. If you are secretive about everything, people are likely to use their imaginations to fill in the blanks in their knowledge of your dealings. This seldom works in your favour.

Happy and sad masks. Do you display honesty to your employees?
Happy and sad masks. Do you display honesty to your employees?
Are you evenhanded in you approach to honesty?

In some organisations you are more likely to be sacked for fiddling your car allowance than for large-scale misselling. There’s an old rhyme, dating from the time when common land was being enclosed by landowners to the detriment of small farmers:

The Law will punish man or woman

Who steals a goose from off the common

But lets the greater felon loose 

Who steals the common from the goose.

Does that apply in your business?


Why Mrs May should consider the risks of a referendum on abortion.

If Ireland can have an abortion referendum, why can’t  the North?

Following the result of the referendum on abortion in the Irish Republic, people have been demanding something similar in Northern Ireland. I advise against it. Am I being undemocratic? Far from it! I believe referenda carry great risks and can operate against the interests of democracy. I have written about this issue previously.

Why is an abortion referendum complicated?

There are many views about abortion. Some people think it should not be allowed in any circumstances, as they value the life of the unborn child as much as that of the mother. Others think a woman should have the right to dispose of an unwanted foetus at any time, for any reason. Between these extremes, there are many who would permit abortion on medical grounds or in certain other situations, such as cases involving rape. Then there is the question of time. Should there be a cut-off point, when we recognise the foetus as an unborn child whom we should protect? When?

What are the risks of a vote on abortion?

It is, therefore, impossible to ask a Yes/No question about this, unless you set out one specific proposal for people to vote on. Who is to decide the wording of the question? Once voted on, it will be difficult to amend the terms without another referendum, or the government will be accused of ignoring the will of the people. In normal politics, people negotiate compromises to find acceptable, workable solutions, because things are seldom black and white. Those who consider themselves to have won a referendum are seldom open to giving ground afterwards.

Is there another risk to an abortion referendum?

Those who have lost will have nowhere to go. No scope for further lobbying. What to do? They may feel disengaged from the political process. Sometimes this can lead to violence or illegal activity, if people feel very strongly about something. In the case of Northern Ireland, there will be accusations of interference in the province’s politics by either the Republic or the UK. People have strong views about such interference.

A preacher preaching. Is he for or against abortion?
A preacher preaching. Is he for or against abortion?
If the Republic can do it, why not anyone else?

We have yet to see how things work out in the Republic. As UKIP discovered, the vote is not always the end of the process. Time will tell.


Who is on your side to prevent your business being defrauded?

I want to help you avoid being defrauded

I have written on the subject  of fraud recently, and several times in the past.  Some articles are about ways you can protect your business from fraudulent insurance claims, and others about fraud generally. As I promised, here are some more tips to help you, and again, I am grateful to Barry Zalma for reminding me of some of these points.

Who else will help keep you from being defrauded?

You may think of some obvious candidates:

  • the Police
  • Trading Standards
  • Internal Audit
  • Your external auditors
  • perhaps you can add a few?

However, you could easily overlook an important group of people who could help you: your employees!

 Man with a magnifying glass on the lookout for signs of being defrauded.
A man with a magnifying glass on the lookout for signs of being defrauded.
How can you enlist your employees to protect your business from being defrauded?
  1. Let them know what fraud means, since some people have wrong ideas.  Fraud includes (where money is concerned) all kinds of deceit, false accounting and lying – to clients, regulators, prospects, colleagues and managers.
  2. Show them the cost of fraud to your business and to others. and explain the consequences, which include the threat to the success of the business and thus to their employment.
  3. Make them aware of the potential penalties which the organisation may impose and  those the courts mete out .
  4. Establish a whistleblowing policy and procedures for people to report fraudulent activity whenever they suspect it.
  5. Ensure people know where to get advice on ‘grey areas’ of law, procedures or ethics.
  6. Follow up reports of suspicious activity.
Who else can help you avoid being defrauded?

Apart from employees, you could encourage other stakeholders to cooperate in reporting suspicious activity. These could include:

  • clients
  • suppliers
  • agents
  • brokers
Don’t be alone, but let’s all work to defeat the fraudsters.

I will write again soon about other ways of preventing being defrauded.

How easily could your business be open to fraud?

I don’t like fraud!

I have written before about fraud  in general and fraudulent insurance claims in particular. You may recall that I have also mentioned that Barry Zalma shares my passion about this and there are a lot of tips on a recent blog of his. Some of them are more relevant to big businesses, whist I generally aim my advice at small to medium sized ones, but a lot of the same principles apply. For more on this and some examples of scams and fraudulent insurance claims go to Zalma’s Insurance Fraud Letter.   I am pleased to note that Barry agrees that such controls form part of an overall Risk Management strategy and this is one risk we all need to manage.

A detective with a magnifying glass. Trying to detect fraud?
A detective with a magnifying glass. Trying to detect fraud?
Do control measures cost more than they save?

I have always believed measures against being defrauded were worthwhile, especially as some are not expensive, anyway. Now I have discovered that there is evidence to prove it, as the Association of Certified Fraud Examiners has compared the losses incurred by organisations that had control measures with those of organisations that did not. Their data was broken down by categories of control measure and showed that all the measures proved cost effective.

A man with a magnifying glass looking at a laptop. Looking for fraud?
A man with a magnifying glass looking at a laptop. Looking for fraud?
What are the most effective measures against fraud?

The above research identified two measures as the most cost effective :

  1. Surprise audits.
  2. Data monitoring

Together they produce on average a 50% reduction in the cost of fraudulent claims. What are you waiting for? If you don’t have those two controls, introduce them asap or speak to me for advice on implementing them.

I will be writing about this again, giving details of more  measures you could consider.

My new book: Risk and Win! has been published.

Who has published my new book?

My latest book, Risk and Win, is now available, published by Business Expert Publishers of New York. It is a simple guide to managing risks in a small to medium-sized business. The price is $19.95 or about £15 as an e-book and $34.95 for a print copy.

Because the publishers are an American firm, the spelling and grammar are adjusted for the US market, but most British readers will be able to understand it. If there is enough demand, I ‘ll see about producing an English translation.

Where can you get the book?

You can see full details on the publisher’s website, where you can order your copy.

I will usually have a few paper copies on me when I go to business networking meetings, which I intend to do more often, now I have finished writing this.

What other books am I writing?

I will soon finish a historical novel, which I will be publishing under a pseudonym, and I am still working on a sequel to Accounting for Murder, Double Entry, which will be called Accounting for Murder, Old Money.

Now I am a writer, have I given up my RM business?

It’s up to you! I am spending most of my time writing, but whether you get the book or not, you can contact me personally for a risk survey of your business, or just a chat about managing risk. I want to help you manage the risks facing your business.

The cover of Risk and Win!
The cover of Risk and Win!

01925 445215

Risk and Win! A Simple Guide to Managing Risks in Small and Medium-Sized Organizations

Can restructuring help control your risks, or will it just move them around?

Growth may require restructuring

Restructuring is sometimes necessary. I have written about the risks of growth and asked whether the structures and procedures in your organisation continue to be fit for purpose when growth occurs. If the business changes, the risks will change. At least the probability and potential severity of each risk will change. Therefore you need to review all the controls in place. You could include a review of the structure of your organisation.

How does restructuring affect Risk Management?

A business should have three lines of defence against risk.

  1. The manager of each task or activity
  2. Internal checks such as risk managers, health & safety officers, audit, quality control
  3. Independent persons such as non-executive directors, external audit,

You may need to strengthen one or more of these. All should have access to top management whenever they need it. Does your structure provide all three lines of defence and are they adequate?

JHM Risk ManagementA man with a question mark, possibly considering restructuring his business.
A man with a question mark, possibly considering restructuring his business.
When do I not recommend restructuring?

Restructuring is not an end in itself or a solution to every problem. I have come across situations where an organisation has a particularly inefficient or ineffective unit within it and top management think they can improve it by changing the lines of reporting. Perhaps they divide the unit into two, or amalgamate it with another. If you don’t do anything else, such as replacing inefficient staff or retraining them, all you get is inefficiency spread around (or alternatively, concentrated).

When does restructuring work best?

When it is one element of a package of measures and when everyone involved understands the purpose of the changes.

Don’t just move a problem around: tackle it!

The Risks of Bombing Syria without clear aims and a risk assessment.

It looks as if the UK will be joining the US in bombing Syria.

The situation in Syria is unique, but in some ways familiar. Do they never learn? I remember all the arguments before, during and after the Iraq war. One question was ‘What are our aims: what do we hope to achieve?’ and another was ‘What do we do when we get there?’

Nobody answered either, because nobody had a plan. It was just assumed that something would turn up. It did. Trouble! And suffering. And finally ISIS.

What’s different in Syria this time?

Russia. The risk of escalation. That’s on top of the risks of making things even worse for the people of Syria and creating many more refugees. These are big risks.

Three Dice. How big a gamble are we about to make?
Three Dice. How big a gamble are we about to make?
Is it not time for someone to intervene in Syria?

What I think is stupid is the timing. Assad has nearly regained control of a large part of the country. This means the war could be over soon. OK so victory for Assad would not please everyone. What would? Who are the good guys? The rebels are made up of lots of groups including several kinds of Islamic extremists. Would the defeat of Assad lead to a new stable government with respect for human rights? Wouldn’t another civil war be more likely? Between the different factions? What if one group won. What would they do to the losers?

I didn’t mention that Assad and his supporters are members of a variety of Shiite Islam, whereas most of the other side are Sunnis It is the same issue in Yemen. Do we favour one type of Islam over another? Would a victory for the Sunnis be desirable?

The Risks of bombing Syria need assessing and managing!

What I am saying is that we need to have clear objectives and some assessment of the chances of achieving them before we intervene in Syria. As it is, there is a real risk of making things even worse, hard as it is to imagine.

The Risks of replacing plastic with glass: safety versus the environment?

Where have I encountered glass?

I have just got back from walking my dog in the park. We had a job navigating around all the broken glass there. It seems to be getting to be a more frequent experience. I have heard reports that some manufacturers are reverting to glass bottles as opposed to plastic. This means more of it on the ground.

This dog has so far managed to avoid treading on glass.
This dog has so far managed to avoid treading on glass.
Why is glass preferable to plastic?

I understand that it is easier to recycle and degrades when buried in soil. People are concerned about the amount of plastic getting into the sea and so into the food chain. They also mention the harm it does to fish and other marine creatures. Their concerns are quite justified. Plastic littering the land is only slightly less undesirable.

So why is plastic preferable to glass? Unless you are a dog.

Broken glass can damage your tyres. That is bad enough if you drive a car. If you ride a bike, it’s much worse. Then has anyone ever  thrown a bottle at you? Whether you were in a car, on a bike or afoot, you would not like it.

Am I just complaining about anti-social behaviour?

No. Glass dropped accidentally can be a hazard too, not only on the road. In the park, it gets onto the pitches and children’s play areas. When the grass is a bit long, you can easily step, sit, lie or fall on it. What about the beach, where you go barefoot?

Am I ignoring the environment?

No. Plastic is recyclable. If not, why do they tell us to put it in the blue bin? Surely, the answer is more vigorous anti-litter campaigning, backed by the application of the Law. The latest initiative in bringing back deposits on bottles is one step in the right direction too.

I don’t want any kind of litter cluttering up the countryside, the sea or the town. It doesn’t have to.  Let’s manage this group of risks properly.


Yet another variation on an old scam – and a grave one!

I thought I knew most scams apart from some new cyberfrauds.

I found this new scam in Zelma’s Insurance Fraud letter, which is a source of much information and entertainment. Barry Zelma does a lot to expose and combat insurance fraud, for which I applaud him. We need to see how frauds work, if we want to put arrangements in place to prevent them, as I will try to show in this example.

What’s grave about this new scam?

The fraudster, Joel McGuire of West Virginia USA, was an undertaker who arranged insurances to cover clients’ funeral expenses. He collected the premiums, paid them to the insurers and made the claims on behalf of his deceased clients. On the face of it, this was a commendable practice, which ensured clients’ families were not faced with large unexpected bills at a difficult time.

How did the scam work?

He put in excess claims and kept the proceeds, as the insurers paid him direct. He did not involve the clients’ families in the process. The claims included many for people who were still alive. Presumably, the clients would have then become uninsured, despite paying all their premiums. Otherwise, unless the insurers would have to be willing to pay out a second time for the same client. (What do you think?)

How can you avoid such a scam?

You should ensure that the arrangements with your insurers go through you. Above all, ensure that they make payments of claims to you, or your family/executors, and not to the undertaker or other intermediary. You could also ensure the insurers contact your family/executors, if they receive a claim.

You may wish to read about a corporate insurance fraud and what I have written about other kinds of scam.

Man with magnifying glass - looking for a scam
Man with magnifying glass – looking for a scam


Is Productivity an essential goal or another misleading statistic?

Why is productivity in the news a lot recently?

Productivity often comes up when people discuss how well the British economy is doing. Commentators usually link this with the debate about Brexit: the worse we are doing, the more  they blame our imminent departure from the EU. On the other hand, the better we are doing the more people say we are going to benefit from leaving. I do not intend to enter that argument in this blog post. People use various statistical measures to show how we are doing. These include growth, of which I have written recently, and unemployment. The debate about unemployment turns on whether you think an increase in part-time, low-paid or zero-hours jobs is a sign of success.  (For whom?)

What about productivity?

One statistic which many people look at to support their arguments is productivity. Almost everyone agrees we want this to increase, but unfortunately most of the evidence suggests we are lagging behind other comparable countries in this respect. Many people, rightly, have been discussing why that is, but I want to ask a different question: is productivity a meaningful measure of our economic performance? But another question comes first.

What is productivity?

Productivity is the measure of output per person per year (or per day or hour if you like). It seems obvious that you want to produce more for the same inputs or to produce the same amount with reduced inputs, right?

What’s wrong with using it as a measure of performance?

It sounds simple. That’s the trouble. Real life is not so simple and is getting less simple every day. It was probably simpler  when most economic activity involved producing physical products. This could be cars, fridges, tins of beans, eggs or even computers. Increases came from improved working methods. In Britain, we once had a lot of inefficiencies built into our production processes, partly due to the reluctance of workers, and especially the trades unions, to agree to change anything. It was also partly due to management’s failure to review and innovate. Therefore, we made big strides forwards when attitudes changed. That was years, possibly decades, ago. There is less scope for such big, simple improvements now.

How can productivity be improved?

It usually comes from mechanisation, meaning the use of more efficient machinery or of better IT. Of course, you can also achieve it, at least in the short run, by making people work harder, through either incentives or penalties. That approach often yields poorer results as time goes by. It is also most effective when people are working at fairly simple, repetitive, easily-measured-tasks. Apart from questions of exploitation and job-satisfaction, that approach has severe limitations. Nowadays we need people to work not just harder or faster, but better. Think how you would measure the productivity of a computer programmer, a carer, a fitness instructor. Even in agriculture, we now want a more sophisticated attitude. It is not just about maximising food production. What about quality? Animal welfare? The environment?

Don’t businessmen (and women) understand productivity?

I think they understand it better than politicians and journalists. They want to maximise profits. That means increasing output only if there is a demand for more of the product, otherwise you get overproduction. Money spent on marketing does not improve productivity, but it might improve profits.

Doesn’t improved productivity lead to more unemployment?

Some people fear that improved production techniques will lead to job losses, unless there is enough demand to sustain greater output. In any one business that could be true, and it could also be true in any one sector. In the economy as a whole , the level of unemployment depends of the total amount of economic activity, which is driven by government policy and international factors, not by technology. (Am I a keynesian? You bet!)

Should we stp measuring productivity?

Not necessarily. It might highlight areas of the economy that need attention. However, more sophisticated measures are needed and we need to ask what we are trying to measure. You might like to read, or re-read, my article on the Three E’s of Management.  

Or you might like my book How to Avoid Being Misled by Statistics.