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How Basic Analytics Can Prevent Compliance Debacles

Thoughts on how simple measures can prevent catastrophes.
Nov | 3 | 2016


Nov | 3 | 2016

Not that long ago, Zenefits was nearly a five-billion-dollar unicorn. It could seemingly do no wrong until things broke bad. Really bad—as in we need a new CEO, message, and culture.

It’s unfair to demonize—or at least single out—Zenefits. Plenty of companies have caused themselves, employees, customers, and shareholders a great deal of grief by pooh-poohing compliance. SOX may not be perfect, but rest assured: As recent events prove, corporate fraud is lamentably alive and well.

Technology and Data Can Improve Organizations’ Compliance Efforts

As much as I believe in the twin powers of technology and data, make no mistake: They alone will never eliminate greed. All of the software and analytics in the world can’t possibly stop certain employees and corporate officers from either looking away or failing to investigate ethics claims. Still, it’s folly to believe that organizations’ compliance efforts would not benefit from enhanced technology and data.

In fact, in many cases, astonishingly simple database queries can prevent major crises. For instance, consider the following fictional data on new accounts set up at bank XYZ:

Data and audits may not prove anything, but they often serve as warning signs of potential internal fraud.

It doesn’t take a data scientist to see what’s going on here. Rep #890 seems to be setting up quite a few accounts for XYZ employees. Either he is particularly good at networking or something untoward is going on. If it’s the latter, then this rep isn’t adept at covering his tracks. (E-mail domain is remarkably suspicious here.)

Note that the data above doesn’t “prove” anything, but it should certainly serve as a warning sign of potential fraud and abuse.

Along these lines, why not set up alerts on similar types of potential issues? Off the top of my head, they may include:

  • Reps who set up an inordinate number of accounts in a single day.
  • Reps who set up an inordinate number of accounts from a single organization in a single day.
  • Reps who set up an inordinate number of high-margin accounts in a single day.

Simon Says: Reduce the odds of fraud with simple analytics.

I could go on but you get my point: Equipped with even basic reporting and analytics, audit and compliance personnel can prevent an organization from PR nightmares, lower stock price, and client lawsuits. Collectively, they’ll reduce the odds of employee fraud and the severity of it when it does take place.

IBM paid me to write this post, but the opinions in it are mine.

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