Father's Day Crash
Managing Risk with AP Automation
Posted by Steve Wilcox on Wed, Jun 24, 2009 @ 08:43 AM
I had a very enjoyable Father's Day ... unlike 2 years ago. You see, in 2007, instead of enjoying a relaxing brunch with my family like most normal fathers do, I wanted more thrills and excitement, so I entered a bike race!
On the very final sprint in the last 200 meters, I crashed ... very badly.
The unspoken truth in the cycling community is that racing is very dangerous. Riding at very high speeds in a tight shoulder-to-shoulder pack gives you very little reaction time if something goes wrong. You must be alert as possible to the sudden movements of other riders, road conditions, upcoming turns, etc. You have to constantly manage and assess the risks ... and especially be aware of riders who might do something stupid and then play it safe and avoid them ... even if it means losing the race.
To make a long story short, I did not manage risk very well on Father's Day 2007 and ended up paying dearly. During the final sprint, a reckless 20-something kid swerved up beside me outside the yellow line (you are not supposed to cross the yellow divider line on the road for obvious safety reasons). I knew this kid was dangerous because he had been riding erratically the whole race. The prudent thing to do would have been to hit the brakes, give up any chance of winning and let him go past me. But noooo, I stubbornly held my position because I felt strong enough to win the sprint.
That is the last thing I remember.
I woke up in the ambulance with a concussion, some very serious lung contusions, a broken shoulder blade and some very nasty road rash all over my body. To this day, I still have absolutely zero memory of what happened but witnesses said that as my front wheel was clipped (i.e. I was cut off), I did a spectacular flip in the air and landed on my head and shoulder ... at close to 40mph. Apparently, it was a bad pile up -- another guy in the ambulance had lost all four front teeth!!!
Lying in the hospital bed, my 7 year-old daughter's reaction to my injuries struck a deep chord -- I realized how lucky I was to still be alive and not be paralyzed ... things could have been a lot worse.
My Father's Day bike crash is a story about poorly managing risks and paying the costs. The economic crash is also a story about poorly managing risks (see blog entry here). After most crashes, regardless of the type of crash, risk management becomes a priority. So, in today's tough economic climate, it's no surprise that managing risk has become a top priority; especially for CFOs:
My
In the business world, risk is managed with strong internal controls. In fact, strong internal controls optimize business performance. Here's another way to think about it -- controls are like brakes. Brakes allow you to go faster. If a bike didn't have brakes, how fast could it really go? Of course, you also have to be willing to use the brakes! Strong internal controls, like brakes, allows a business to put the foot on the accelerator and aggressively reduce costs without increasing risk.
With the unemployment rate at its highest level in over three decades, it is clear that companies are simply trying to survive by cutting expenses and laying off workers. Individuals whose homes are declining in value and whose retirement assets have been wiped out are also trying to survive. Many are becoming desperate. It is not surprising that occupational fraud is increasing. It's a vicious cycle where losing valuable assets to fraud may push a struggling company perilously close to insolvency which, in turn, increases the risk of fraud.
And fraud is on the uptick.
In a recent Special report on Occupational Fraud by the Association of Certified Fraud Examiners (ACFE), more than half of the Certified Fraud Examiners (CFE) surveyed said the frequency and dollar amount of fraud is increasing:
"The message to Corporate America is simple: Desperate people do desperate things," said ACFE President James D. Ratley, CFE. "Loyal employees have bills to pay and families to feed. In a good economy, they would never think of committing fraud against their employers. But especially now, organizations must be vigilant during these turbulent times by ensuring proper fraud prevention procedures are in place."
From the 2008 Fraud Report to the Nation, we already know that over half of all fraud incidents are AP related. This leads to some serious implications for AP:
- Layoffs are affecting AP's internal control systems... Most in-house fraud examiners reported that because of layoffs, some internal controls procedures were eliminated.
- Fraud levels will keep rising... Almost 90% of fraud examiners expect fraud to continue to increase during the next 12 months.
But the recession is affecting more than just increased fraud risk. AP staff cuts that are not coupled with process improvements will inevitably lead to more mistakes and errors.
How is risk being mitigated in your AP processes? Is a fraud or accounting crash lurking around the next corner?
AP Automation can reduce risk because it simplifies and centralizes processes and most good solutions have preventative controls that are automated.
Here are some of the specific ways in which AP Automation strengthens controls to manage risk and prevent fraud and errors:
- Robust Approval Framework
- Segregation of Duties
- Automatically enforced at the transaction level
- Automated Enforcement of Policies and Procedures
- Properly Maintained Transaction Backup
- Internal and External Audit Support
-Rakesh Shukla
@rakesh170
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