Risk Insights Logo

The regulatory spotlight - 'the more things change...

September 4, 2017

Another week surfaces another raft of emerging challenges for our Australian regulators and investigative bodies.

At least the burden has been shared among various sectors and, in some cases, more than one regulator from the same industry is getting in on the action:

  • Resources – investigations into alleged international bribery and high-level corruption.
  • Banking – shifting the focus from much publicised financial transaction issues to a more systemic look at governance, culture and accountability frameworks.
  • Local government – ongoing fraud and corruption issues relating to land rezoning and sales.

The relevant inquiries are underway and no doubt the details of each matter will become a matter of public record in due course. But the primary question remains: how do the regulators, integrity bodies and oversight agencies draw on these particular cases to sharpen their future focus and to target their own monitoring activities?

The answer must surely lie in forensically establishing the contributing factors in each of the cases of alleged wrongdoing:

  • What were the key touchpoints for the corrupting acts (how did the opportunity arise, how was it maximised and why didn’t we spot it)?
  • What were the prevailing operational/contextual factors at the time (e.g. a need to expand operations into another country, a need to facilitate quicker transactions or a simple self-sustaining profit motive)?
  • What data is or was available that could have helped to prevent or detect this activity earlier, and how do we make sure we can use it better in the future?

Any inquiry worth its salt will not only look beyond the obvious sources (e.g. internal financial systems) to answer these questions, but will also consider what information existed in other less obvious locations that might allow for triangulation of information.

As an example, in local government we often hear about alleged misconduct in relation to land supply and rezoning for improper financial gain. But does anybody monitor trends or financial anomalies in post contract land transactions to identify red flags? If they do, it’s certainly not done in any coordinated way.

Some of this ongoing risk analysis is not as hard to do as you might think – it just takes a new approach to understanding what the integrity risks look like, how the conduct could be perpetrated and what data we have available to monitor for the specific risk occurring.

Our regulators and integrity agencies need to investigate one-off matters, but it is time consuming, costly and resource intensive work. Where they can really get the greatest bang for the public buck is by forensically dissecting the characteristics of the corrupt acts they investigate, and applying those variables and key factors to other inherently risky areas so they can better prevent and detect corruption in the future.

There is no doubt that transparency is central to managing the risk of misconduct. But let’s be honest about this: transparency only works where we assume that people want to do the right thing. Significant fraud and corruption takes place in the shadows, so maybe it’s time to rethink spending efforts on education and training, and more on profiling and targeting the sentinel risk areas.

Maybe then we can avoid completing the truism…the more they stay the same’.

Share this article

Get more insights like this

Blog Post
The Assurance Blog
March 3, 2022

Data in Audit Guide

Read article
Blog Post
The Assurance Blog
December 16, 2021

The Data-Confident Internal Auditor: Software

Read article

Subscribe to our mailing list

Get notified by email about new blog posts and podcast episodes by the Risk Insights Team.