Three critical traits that help company board members combat fraud

There are a number of risks involved when one accepts a board position and agrees to help steer a company in the direction that's best for its shareholders. One?prominent risk is #fraud, which impacts companies of all sizes, across all industries. Because a director's reputation often becomes synonymous with the company's reputation, it's vital that board members understand and actively combat the risks posed by fraud.

To do so effectively, it's in the best interest of the director to be:

·????????committed to the company's success

·????????aware of any and all threats to that success

·????????decisive in his or her actions to prevent potential disaster

No #BoardOfDirectors can do much about the first condition—the fraudster's motivation and self-justification. However, they can have a significant influence in limiting the opportunity for its success by building safeguards into daily operations of the organization, and providing it with strong and consistent leadership from the top.

For that, we’ve identified three critical directorial characteristics or traits that have a meaningful influence on reducing an organization's fraud exposure.

1.???Commitment

Anecdotally, the most effective directors are those most committed to the goals of the organization. They have a personal motivation to ensure that the organization's governance is as strong as possible. That means they are prepared to commit the time and effort necessary to understand the different concepts of corporate governance, and to determine where and how these might best be applied in their organization.

2.???Knowledge

The knowledge requirement for the effective director includes the wherewithal he or she has personally gained about the organization and its governance, and the legal, political, and cultural environments in which it operates.

Knowledge is power. This is basic. Yet equally important is the willingness to recognize the gaps that may still remain in the board's collective knowledge.

3.???Decisiveness

Raising challenging questions, pointing out the gaps in a plan, or opposing a measure popular with your fellow directors—these are not comfortable positions to be in. Human nature has a strong tendency to go along to get along, yet the effective director recognizes that an uncomfortable position may be necessary for the sake of the organization.

Effective decision making often derives from a high level of skepticism. Trust, but verify when dealing with a potential partner entity or individual. Implement protocols that are consistently followed and thus can be relied upon. When considering a transaction, thorough qualitative and quantitative due diligence can become standard practice.?

Decisiveness, together with knowledge and commitment, are valuable at every level of an organization, but it is essential to have it at the top. When appropriately applied, the three traits of effective directorship work well together. Commitment and knowledge will tell you what's right, and decisiveness will enable you to do it.

Read the full article on bdo.ca to learn more about preventing board fraud.