The Fraud Triangle

I am certain that you have, at one point in time, come across the concept of the love triangle, but this piece is not discussing that well-known subject. Rather, it is a concerted attempt at discussing the concept called the fraud triangle. You might have or never heard of this concept before, but I am sure it is a phenomenon you have seen in practice.

What is the fraud triangle?

According to the Corporate Finance Institute, fraud refers to a deception that is intentional and caused by an employee or organization for personal gains. This means that fraud as a deceptive act geared towards accruing personal gains to the detriment of others or an organization cannot only be perpetrated by individual employees alone but even by organizations themselves.

But why would any organization or individual employee engage in fraud?

Organizations and individual employees engage in fraud for three reasons that have been fragmented into the concept called the fraud triangle.

Because triangles are made up of 3 different angles, the first angle is the loop of opportunity. Opportunity is the only component of the fraud triangle that an organization exercises complete control over — without which there will be a loop for any employee to cash in on. On many occasions, employees engage in fraud because the organization is slacking, or the leadership is laissez-faire.

The second angle to giving a thought to fraud is the incentive — or as I will term it, the largesse — that comes as a reward for engaging in fraudulent acts. This is mostly borne out of the pressure at work on employees and a need for them to find a way around the metrics of performance at work — which will consequently translate to good performance ratings (if the employee isn’t found wanting). Many employees who are not as fit as a fiddle would prefer getting a good performance rating at work either by hook or crook just to cover up for their lapses.

The third angle that completes the triangle is rationalization. This stage comes after an employee has given careful thought to their game plan about the situation and has overcome the fear of giving their plans a try. Because they live in self-denial of the consequences of such nefarious plans, they rationalize their plans with unpardonable excuses like: ‘I have been working for so long, yet no promotion’; ‘I deserve a better pay’; ‘I work harder than some employees’ and a host of other excuses they usually come up with.

How then can Employees and Organizations get rid of this cankerworm called fraud triangle?

- Employers and employees should mutually agree upon KPIs and ensure it is realistic and achievable to avoid unnecessary pressure.

- Employees should learn to speak up whenever they feel overwhelmed and discuss their challenges with their upline, for possible solutions.

- Management should show genuine interest in the all-round growth of members of staff while ensuring everyone discharges their duties accordingly.

- Everyone should learn the principles of having difficult conversations and start seeing it as an ample tool to resolve conflicts — not worsen them.

- Employees should understand that the organization is not obliged to pay them more or promote them due to length of service, but by the value the employee adds to the organization.

Rounding it off, though the above-listed points are not exhaustive do’s and don’ts employees and organizations should adhere to in order to effectively tackle fraud in the system, they are sure-fire ways to ensure transparency and productivity at the workplace.