Researchers have found that the novelty of global events can often prove the perfect opportunity to commit expense fraud.
It’s estimated that the World Cup will help to deliver a $31 billion boost to the Russian economy.
That’s the power of an event which, in 2014, attracted a global audience of 3.2 billion people – nearly half the world’s population.
Research has shown that a significant part of this financial boost comes from the feel-good effect that a major sporting event or a national occasion can help to create.
A 2010 study by Allmers and Meaning of past World Cup events highlights, found that economic benefits were as a result of a ‘free and relaxed’ atmosphere cultivated by the tournament – people are more willing to spend and consume.
Andy Haldane, Chief Economist at the Bank of England, has already started to talk of a link between improving consumer activity in the UK and the English team’s successful World Cup campaign.
But the idea of a ‘World Cup effect’ and the relaxed attitude towards financial matters that it could cause, may become a challenge for those who are tasked with maintaining control of company spending.
Merging business and pleasure
It’s a particular test for finance teams who face a surge of reimbursement claims linked to the occasion, with celebratory drinks and office outings that can blur the line between business and pleasure.
Financial professionals are also not immune from the feel-good effect of a major event or occasion, and there’s an increased likelihood that a blind eye will be turned to costs that may otherwise be queried.
The study identified the main reasons finance professionals gave for their reluctance to challenge claims, with 20 percent saying they felt too ‘awkward’ and 17 percent not wanting to appear ‘rude’.
These kinds of attitudes are liable to be heightened during any kind of celebratory event or occasion, as financial controllers don’t want to be perceived as ‘killjoys’ who are going against the national mood.
Risks of relaxing policy
It’s one of the factors that might help to explain the increased level of expense fraud that typically occurs during the Christmas period – as a lenient approach is often adopted during festivities.
While the individual losses caused by falsified and exaggerated claims during an event may be minor, the long-term impact of any failure to challenge suspicious claims can be significant.
The failure to robustly police an expense policy creates a self perpetuating problem, as employees feel increasingly emboldened to maintain and extend fraudulent behaviour.
By relaxing rules for costs that relate to certain events or occasions, it also promotes the idea that employee expenses can be used as a form of bonus system.
It’s a belief that allows even the most honest of employees to justify ,viewing it as an acceptable way to receive additional rewards for their efforts.
It’s an attitude that can embed itself within a workplace, normalising fraudulent practices and turning employee expenses into a dangerously toxic area of company finances as employees use expenses as a way to address grievances.
So while a global event such as the World Cup has an incredibly power to lift the mood of a nation, it’s important for finance teams to keep their ‘eye on the ball’ when it comes to ensuring out-of-office costs are legitimate.
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