The TAFP Fraud Essay Highlights Corporate Culture, Whistleblower Protection, And Risk Management.

1. Describe the actions taken and behaviour displayed by senior management throughout this saga in terms of enterprise risk management. Discuss if these actions and behaviour were not only inappropriate but potentially high risk, and whether they aggravated the situation. If you were in the position of Sam Venus, what would you have done differently during the crisis to address the risk involved, and what might you put in place to mitigate similar future risk? Note: in order to answer this question properly, you need to identify the risks involved, as well as suggesting ways of managing them.

2. “Show me a company’s various compensation plans, and I’ll show you how its employees behave” - Jack Welch, Former CEO of General Electric Examine the key areas of concern in TAB’s remuneration plan. Towhat extent do you think these influenced the corporate culture and employee behaviour in TAB? What changes, if any, would you make to the remunerationplan to minimise agency conflicts?

3. In the Senate Inquiry Final Report, ASIC was described as “waiting for complaints, investigating a minute proportion of them, and prosecuting even fewer.” Critically evaluate the actions taken by ASIC throughout the course of the financial planning scandal, while highlighting difficulties ASIC might have faced during its investigations.

4. The media played an important role in exposing the fraud in TAFP. Discuss the role of the media in promoting good governance. Are there factors which limit itseffectiveness? Can social media also play a role in enterprise risk management? If so, how?

5. Briefly discuss the importance of a good whistleblower protection policy. Do you think the policy sufficiently protectedBloe and his fellow whistleblowers? What further improvements can be made to encourage those who are aware of wrongdoings in an organisation to come forward, instead of remaining silent?

6.TAB had an excellent reputation amongst its customers but TAFP severely damaged it. What are the challenges faced by an organisation like TAB in promoting ethical behaviour, compliance and good governance throughout the group?

The TAFP Fraud Case

1.TAFP was involved in a fraud case during the year 2003 to 2012.The financial planners interfered with their customers files and forged their documents by forging their signatures,¹ to transfer clients’ money and invest it in extremely high risk investments. Even though they knew that what they were doing was wrong, they did this in order to personally benefit by earning higher commissions and bonuses from the bank. The senior management has highly contributed to the failures and loses faced by the clients who entrust their bank and opt to deposit and save their money with them. The managers convinced the clients of taking care of their money and being safe in their bank, ² yet they used the clients’ money in the wrong way. They would forge their documents to get access to the money and use it maximize their profit making in collectively getting high commission without caring how it would affect the client in future. The account owners would be upset if they find out that their money was invested in risk projects to work for the benefit of the bank. The managers would defend themselves when caught. They told the clients that their money got lost in misfortunes. These kinds of behaviors are inhuman for it caused a great hurt to the affected clients. Losing money which one has worked upon saving for another man’s greed really hurts and this behavior should be discouraged from any money dealers that belong to many people rather than individual. As the saying goes once beaten twice shy, the clients who experienced the results of this risky game decided to completely withdraw from that bank and even filled a complaint to be compensated. This caused a great lose to both the clients and also the bank at large. If placed in the place of Sam Venus, ³ the CEO of TABS, I would suggest that heavy fines be imposed on the irresponsible people who had indirectly stole people’s money, but directly tarnished the name of the bank. They would pay back the clients’ money and at the same time lose their jobs. I would have handled the case as early as the whistleblowers started to react, ⁴ not allowing further loses to be incurred. Those who have acquired higher positions in the company using this dangerous method should be demoted and even temporarily stop job for investigations to take place. If with evidence found guilty, consequences would follow without any delay. These cases would lead to some new additional rules that no money that would be moved from anyone’s account to the risky investment without their physical appearance before the manager rather than just signing of the documents. All this would be for the benefit of both the bank itself and its members to mitigate similar future risk from reoccurring.

The Importance of Corporate Culture

2.A company’s culture would therefore influence the behavior of its employees either positively or negatively. A positive culture that shows benefit to the company and the people working within should be encouraged and supported from all directions while that which causes harm to either the company or any of the employees or clients should be discouraged and diminished. According to TABs remuneration plan, ⁵there culture consisted of a saying, “meet your sales targets, or surrender your rice bowl”. This meant that, if one wishes to see increment in their commissions and enjoy their bonuses, they had to work hard in convincing more clients to participate in investing in the risky investments. The employees tried their level best including dishonest and unfair means, like forging their client’s documents to win them without their knowhow and permission, fearing to surrender their rice bowl. For example in the case study, Don being one of the top most writers,⁶he was amassing a big number of clients investing with him, notched sales through corrupt means and other dishonest acts. When Bloe reported the matter, he didn’t believe what response was taken. The manager brushed the issue aside instead of dealing with the case appropriately. Little did they know that Don was under protection and a top earner of TAB due to his status? This encouraged the kind of behavior observed from the

financial planners because of the personal benefit to get, for they got what they paid for. Agency conflicts would be minimized by encouraging the workers to have a place for honesty and discouraging forgery and fraud too.

3.ASIC was an investigation group which got complaints from TAB clients. It could take longer period of time to respond to the cases though the victims felt that they should be dealt immediately. Despite the situation, the whistle blowers emphasized until action was taken. ASIC took long to respond because it had a couple of files to deal with. As it was handling one case others pop in and need to be dealt with too. It managed to deal with a few at a time and sometimes didn’t manage to get chance to solve. Some of the challenges might include impatient clients, ⁷ unsatisfactory of their response and too many complaints waiting to be attended to among others.

4.The media can take part in promoting good governance. This happens when the media exposes anything done against the law and people’s will to a broad area. When it reaches many people in its reality without any alteration of content it has to be dealt with immediately before they riot. This helps improve the way ⁸of doing things. Media also faces some challenges like,

ASIC's Role in the TAFP Fraud Case

living in fear that a superior person may indulge them leading to their dismissal from work. In the same way it can respond to enterprise risk management issues if forwarded to them in good time. 

5.A good whistle blower protection policy is important since it covers all whistleblowers. Whistleblowers often recognize their fellow whistleblowers, and protect them whenever possible. With a good policy⁹ which can protect them from any threat as they are doing their work. This strengthens them enabling them to investigate and feel free to air any issue affecting the many without fear or favor. There is one thing that whistleblowers must do. Whenever caught in a crime, they should be willing to come forward before being forced to do so, since it is an agreement. Establishing an Office of Whistleblower¹⁰ to allow quicker response to whistleblowers and commencing an organization-wide improvement process of its communications and transparency. Whistleblowers¹¹ will have a meeting point in case one identifies a burning issue to report, they will not hesitate anymore

6.Some of the challenges faced by organizations such as TAB include;

Lack of close supervision–TAFP being a financial planning arm of TAB, lacked close supervision from the senior managers. This is the reason as to why they could have fraud and forging documents and no one close would notice until the whistleblowers tipoff. This tends to be a big challenge to most organizations.

Conflict of interest-though the whistle blowers wanted Don to be dealt with for his dishonest acts the managers seemed to care not for he was the highest¹² trustee and even promoted. Some organizations fail to succeed due to differences in their interests.

Poor management-the senior managers used to cover up evil whenever exposed by whistle blowers. 

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