The Future of Work: Enhancing Corporate Culture to Deter and Detect Fraud

Companies that swiftly transitioned to remote work during the pandemic are now exploring ways to bring employees back to the office full-time, implement hybrid models, or establish long-term remote work policies. These changes present new challenges in maintaining an ethical organizational culture to proactively deter and detect fraud.

As a partner of the Anti-Fraud Collaboration (AFC), the Center for Audit Quality (CAQ) advances discussions among all members of the financial reporting ecosystem about ways to strengthen fraud prevention, and corporate culture is a key pillar.

The AFC’s latest resource, The Impact of a Changing Work Environment on Corporate Culture, offers valuable insights and actionable guidance for organizations looking to strengthen their culture and anti-fraud efforts while navigating an evolving work environment.

Keep reading for my key takeaways from the report.

Adapting Corporate Culture in a Changing Work Environment

An organization’s culture evolves alongside workplace expectations and business practices. As organizations navigate shifts in the work environment, many employees—including managers—may feel disconnected or uncertain about their roles. According to human resources and culture subject matter experts, employees are increasingly looking for flexibility, autonomy, and empathy in the workplace. It is critical for leaders to balance these expectations while preserving a strong corporate culture.

The prolonged period of remote work, combined with a new generation entering the workforce, has changed how employees perceive corporate culture. In a McKinsey & Company study, 10% of workers worldwide said they would likely quit their jobs if they were required to work at the office every day. They also agreed that they would forgo more than 20% of their compensation to work the right number of days at home.

Companies have faced pushbacks in response to return-to-office mandates, in some cases leading to increased turnover, lower job satisfaction, and other potential unforeseen consequences. It is important to recognize the considerable impact of demographics on employees’ attitudes and experiences with regards to remote, hybrid, and in-person work, and remain flexible when making workplace decisions for a broad employee base.

Reinforcing Ethical Culture in a Hybrid Work Environment

A strong ethical culture must be reinforced through deliberate actions, especially in a changing workplace.

A few of these strategies include revisiting the hiring process regularly to ensure it aligns with the work environment, assigning a peer mentor to help new employees navigate the company culture and foster connections virtually, and emphasizing achievements and employees’ positive impact on the organization, while avoiding micromanaging employees’ work.

Additionally, organizations should readily and continually assess the unique impact new working models have on their governance, risk management, and control processes to ensure that cultural integrity remains intact.

How Changes in Work Environment Impact Fraud Risks

As work environments continue to evolve, the risk of fraud can increase in unexpected ways. Employees who feel disconnected from their organizations while working remotely may be more likely to rationalize fraudulent behavior, and they may find it easier to perpetuate fraud or engage in misconduct without being caught.

According to the Association of Certified Fraud Examiners (ACFE), the most common behavioral red flag for fraud is an employee living beyond their means. In a traditional office setting, coworkers and managers may notice signs such as expensive purchases or lavish vacations. In a remote environment, these warning signals are often more difficult to detect. The absence of casual, spontaneous in-person contact to build relationships among employees may also weaken employees’ sense of connection to their company and its ethical culture.

Strengthening accountability, reinforcing ethical values, and fostering a culture of integrity—whether in-person or virtual—will be critical to identify and mitigate fraud risks in the modern workplace.

Fraud Prevention Through Culture and Risk Management

An ethical corporate culture can mitigate the pressures that lead to fraud through strong risk management practices and appropriate incentives. However, in a time of constant disruption and changing work environments, management must regularly assess emerging risks and adjust their monitoring strategies accordingly.

Organizations should consider a variety of tools to enhance their culture and deter fraud and misconduct, including:

• Robust internal controls, policies, and processes
• Applying the elements of the fraud triangle in risk assessment
• Employee surveys and culture metrics to measure sentiment
• Leveraging technology for fraud detection
• Encouraging teamwork and cross-functional collaboration
• Setting a strong tone at the top
• Implementing whistleblower and ethics hotlines
• Effective change management strategies

There is not a one-size-fits-all approach to establishing a strong ethical culture, particularly in today’s eclectic work environment. However, by leveraging these tools and techniques, organizations can create a solid foundation that fosters, reinforces, and enhances ethical behavior across the workforce.

A strong ethical culture not only deters fraud but also strengthens trust among different stakeholder groups. By embracing flexibility, reinforcing core values, and implementing effective fraud prevention strategies, organizations can navigate the complexities of today’s business and regulatory landscape while upholding the highest standards of integrity.

As the fraud risk landscape continues to evolve, I encourage your organization to review how its risk management practices and incentives can be enhanced to foster a strong culture. Make sure to follow the AFC on X and LinkedIn to stay up to date on the latest resources to deter and detect fraud.