A practical, efficient approach to effective data analytics

August 24, 2022 11:08
Photo: Reuters

In today’s complex business environment, corporate investigations are becoming more frequent and publicized as business becomes increasingly regulated. Companies are finding themselves with increasingly global operations, complex supply chains, huge data sets, data governance considerations and a variety of internal and external stakeholders to coordinate.

Our Global Fraud and Risk Report 2021/22 (GFRR) which surveyed 1,336 senior decision-makers for risk strategy, including general counsels, chief compliance officers, chief finance officers and CEOs at corporates, revealed that over four in five (82%) respondents said their organizations had been significantly impacted by fraud, corruption, illicit activity, money laundering or other serious misconduct.

However, the GFRR highlighted a growing focus on bribery and corruption risk in the boardroom, with 72% of global respondents stating that bribery and corruption risks are being given sufficient board-level attention and investment. In Asia Pacific (APAC), China and Singapore, confidence was higher than the global average, at 79%, 94% and 85% respectively.

The attention given at a board-level globally is reflected by the high number (86%) of organizations now using data analytics to detect bribery and corruption risk proactively. Adoption in APAC is particularly high, especially within China (98%), Singapore (97%) and India (92%), again reflecting the region’s above average confidence.

Interestingly, the high number of respondents impacted by misconduct (82%) belies the uptake and implementation of proactive data analytics (86%). The results point to data analytics capabilities not focusing on key risks and/or organizations not maintaining the proper collection/governance of data points to effectively monitor those risks.
When considering their risks, most respondents cited a lack of visibility over third parties like suppliers, customers and distributors (46%) as presenting the greatest threat of bribery and corruption. The hasty reconfiguring of supply chains in the wake of COVID-19 likely caused developed economies such as Canada (56%), the U.S. (53%) and the UK (49%) to exhibit greater concern than Asia Pacific (44%) respondents, given their dependency on complex international supply chains.

The above suggests that organizations may not be combining internal and external information well enough to monitor outside threats confidently. To take control of both internal and external risks, companies must consider creative ways to maintain sight of the risks posed by their third-party relationships, and ensure they are training employees and contractors to spot the risks and know what to do when they see them.

We believe organizations can achieve effective, efficient risk mitigation strategies through the innovative use of technology and analytics, such as running bespoke algorithms to spot anomalies not only at their headquarters and satellite offices, but also in their global supply chains, to receive reliable and timely on the ground information in all the places they do business.

Applying meaningful data insights to a situation can significantly enhance decision-making and reduce cost throughout the compliance, investigation and litigation life cycle. Good data governance not only enables an organization to hit the ground running when planning an internal investigation, but also reduces costs associated with compliance, investigation and downstream litigation. Beyond this, it also reduces internal costs associated with hardware for storing unnecessary data on servers that should be deleted under a retention policy, as well as staff to manage the data and servers.

When databases are maintained properly and processes become more automated, the time needed for preparation before an investigation will decrease significantly, thus allowing investigators more time to focus on finding the facts that matter.

Harnessing the power of data doesn’t have to be a daunting task. Identifying critical data elements, understanding and enhancing the end-to-end data governance life cycle to meet the organization’s needs and applying the appropriate technology to help monitor these efforts will lay the foundations for a robust, effective program which adds value across all business functions.

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Senior Managing Director and Head of the Greater China, Forensic Investigations and Intelligence of Kroll