Over the past decade or so, the world has witnessed successive corporate scandals, culminating with a unprecedented, crippling recession on a global scale. It started in the US with scandals like Enron and the collapse of financial institutions and investment banks and reached its climax at the height of the sub-prime mortgage crisis in 2008-2009. We are now witnessing the fallout in Europe and other parts of the world where a mirror image of the US crisis has resulted in governments that are struggling to even produce the bailout funds required to preserve their respective economies. The buzz-word is “austerity”; but what that really entails is tightening the belt and managing all risks.
Given this backdrop, there has never been a more critical time for organizations to focus their limited resources on “risk management”, at a minimum to ‘plug the holes’ through which capital is leaking and maximize growth potential.
“Risk management is critical to an organization’s ability to function effectively and to be successful,” says Aaron Grinhaus, a partner with The Expert Risk Management Group (ERMG) and a Corporate and Tax lawyer at Himelfarb Proszanski LLP in Toronto, “you show people what to look for and how to deal with it if it happens.” The Expert Risk Management Group consists of Mr. Grinhaus, who frequently advises on the rights, liabilities and obligations of being a director, officer or manager of a corporation; Charlotte Goldfried, an Employment lawyer and an expert in professional training programs; and Edward Nagel, a forensic accountant and an expert in fraud awareness and prevention training. Mr Grinhaus continues “the real problem is knowing what to look for, and that is where the consultants prove most valuable.”
Most companies deal with similar types of risk: internal, in the form of fraud and negligence; and external, in the form of liability to third parties and the business environment. Identifying the risks inherent in your industry and having a plan created for you will not only save you thousands or more in legal and accounting fees, in some cases it’s the law.
“Boards of directors and upper management have a duty to ensure that risk is managed, and if they shirk that duty they will not only expose the company to a myriad of risks, but even worse, bring liability upon themselves personally. The CRA, for example, can ‘pierce the corporate veil’ and get at directors personally for various tax liabilities. And it doesn’t end there.”
“Whether an organization is comprised of 5 or 5,000 employees, its critical that the organization understand where its exposed to risk and whether internal controls exist and are effective at mitigating such risks”, says Edward Nagel, a partner at ERMG and Principal of nagel + associates inc., a Toronto-based boutique forensic accounting firm. “From my experience, prevention—rather than detection—is the best deterrent against fraud.”
However, simply having internal controls and policies/procedures in place, is insufficient. Now more than ever, employees are expected to detect and report allegedly fraudulent activity. But, if they are not provided with the appropriate training or mechanisms to report such allegations, it is unreasonable to expect them to detect this type of activity.
Organizations often overlook one of their greatest risk management tools: their people. “After a fraud is revealed, in hindsight, employees invariably recognize transactions that appeared suspicious; however, they simply did not recognize the ‘warning signs’ that the transactions were in fact part of a fraud scheme”, adds Nagel.
The value of training your employees to identify risk, at its root, cannot be overstated. “It is essential to have a well planned and executed human resources strategy with respect to employment practices and legal compliance. All too often, there is no plan, the plan is poor, or it is written and then placed on a shelf, and forgotten. Organizations run the risk of costly litigation and penalties, with such practices”, adds Charlotte Goldfried, a partner at ERMG, and lawyer at Goldfried Law (www.goldfriedlaw.com), a boutique Employment Law Firm, located in Toronto.
Needless to say, billions of dollars are lost every year as a result of fraud, poor human resources employment practices, and upper management and director and officer ignorance of their fundamental obligations to the corporation. Investing in cost effective risk management training, such as the comprehensive and concise seminars offered by The Expert Risk Management Group, will create a more efficient and productive business environment required for success in today’s marketplace.
ERMG uniquely combines the skills and experience of a corporate/tax lawyer, employment lawyer and forensic accountant to help organizations to identify key risk areas and provide practical strategies needed to manage and protect a company's reputation, integrity and financial well-being. In short, management and boards who prefer to spend their nights sleeping rather than worrying, turn to ERMG for preventive and proactive approaches to risk management.
If you would like to contact The Expert Risk Management Group or Mr. Grinhaus, Ms. Goldfried or Mr. Nagel, please email info@expertriskmanagement.com.
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