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Fraud & Corruption Resistance Prole The Framework Public Version
Fraud & Corruption
Resistance Prole Fraud & Corruption Resistance Profile (FCRP)

The Framework

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Fraud & Corruption Resistance Profile
The Framework Public Version

October 2006


Authors:
Knut
Anderssen

(DNV)
Nigel
Iyer

(HIBIS)

Veronica Morino (HIBIS)

Peter Wieland
(DNV) Fraud & Corruption Resistance Profile (FCRP)

The Framework

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FCRP rev 1.0
All rights reserved. No part of this publication may be reproduced, transmitted or copied in any form or by any
means, including photocopying.
Introduction
The fact that corruption constitutes a major obstacle to democracy and the rule
of law has been known for some time. Empirical research estimates that an
average organisation loses about 5% of its total annual revenue to fraud and
abuse committed by its own employees. Thus, fraud and corruption are major
risks for all organisations.

Recent cases of organisations involved in fraud and corruption show a substantial
financial loss, both directly due to the fraud and subsequent investigation
expenses and fines as well as indirectly due to reputation damage. No surprise
that the fight against fraud and corruption has become a popular and focal topic
within Corporate Social Responsibility (CSR) these days and this has been
supported by both sides, the corporations and society at large.

Anti-corruption has been integrated as 10th principle into the UN Global Compact.
Anti-fraud measures are being strengthened in many organisations following
major corporate financial fraud scandals mainly in the US and the subsequent
Sarbanes-Oxley Act of 2002.

As more and more organisations put in place systems to assess and manage
risks of fraud and corruption, one question remains: how can we measure the
effectiveness of these systems to prevent fraud and corruption, and how can we
rate how resistant an organisation actually is?

This framework explains how organisations typically integrate and implement
guidelines and best practices on how to fight fraud and corruption (e.g. the OECD
Business Approaches to Combating Corrupt Practices or Transparency
Internationals Business Principles for Countering Bribery) throughout their
business processes. It is the baseline for DNVs rating system to measure the
resistance of organisations to fraud and corruption.

The Fraud & Corruption Resistance Profile (FCRP) is an assessment system for
measuring the resistance (or resilience) of an organisation, corporation or entity
to the effects and impact (on profitability, long-term value, reputation and
internal culture) of Fraud and Corruption. We use the following definitions:

Fraud: "An intentional act by one or more individuals amongst
management, those charged with governance, employees, or third parties
involving the use of deception to obtain an unjust or illegal advantage".
(International Standards on Auditing ISA 240)

Corruption: "The abuse of entrusted power for private gain" (UN Global
Compact, Transparency International)
Fraud & Corruption Resistance Profile (FCRP)

The Framework

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DNV PROPERTY � 2005-2007 DET NORSKE VERITAS AS
FCRP rev 1.0
All rights reserved. No part of this publication may be reproduced, transmitted or copied in any form or by any
means, including photocopying.



The Fraud and Corruption Resistance Profile (or assessment) has been developed
by DNV using a 12-element model as shown in the Kiviat chart below:




This framework documents each of the 12 elements. The purpose of this
framework is to provide all interested parties with a basic understanding of the
elements of DNVs Fraud and Corruption Resistance Profile to enable them to an
appropriate preparation for an assessment.






Content

Introduction ................................................................................................................................ 3
The Framework of Elements ...................................................................................................... 5
The Concept of Risk................................................................................................................... 8
Sources of requirements ............................................................................................................. 9
Glossary.................................................................................................................................... 11 Fraud & Corruption Resistance Profile (FCRP)

The Framework

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DNV PROPERTY � 2005-2007 DET NORSKE VERITAS AS
FCRP rev 1.0
All rights reserved. No part of this publication may be reproduced, transmitted or copied in any form or by any
means, including photocopying.
The Framework of Elements
1.
Tone at the Top
The Tone at the Top refers to the crucial role played by the Board and senior
management in establishing and communicating policy, taking actions that
demonstrate interest and commitment to the stated policies, and the personal
example they set. This element evaluates the tone at the top in regards to the
prevention of fraud and corruption. Has the message Fraud and Corruption will
not be tolerated been communicated? Are management actions consistent with
the message? Managements demonstration of their commitment to prevention
needs to be visible to all employees, credible, embedded in the organisational
culture and visible to external parties. The purpose of this element is to evaluate
the degree and effectiveness of senior managements commitment to preventing
fraud and corruption. The Tone at the Top forms the foundation on which the
other elements are built.

2.
Fraud and Corruption Risk Assessment
A thorough understanding of fraud and corruption risk across the organisation is
a pre-requisite for effective prevention. The assessment involves the systematic
identification and ranking of those fraud and corruption methods and risks which
can and do affect the organisation at all levels. Fraud and corruption risk
assessment involves looking at how resistant the controls are to specific methods
of fraud and corruption. The purpose of this element is to evaluate the extent to
which the organisations ability to resist fraud and corruption has been assessed.

3.
Fraud and Corruption Risk Treatment
Once fraud and corruption opportunities have been assessed, effective and
mitigating measures have to be put in place by all levels of management, from
the top down. Treatment in the form of a strategic plan, and management
responses will lead to a reduced risk of fraud and corruption as well as a
significantly increased chance of early detection. The purpose of this element is
to measure the degree and effectiveness of mitigating measures.

4.
Implementation of controls
The implementation of internal control measures should correspond to the
specific fraud and corruption risks which have been identified and documented.
In addition certain fundamental controls such as screening of employees,
channels for reporting of malpractice and protection of assets need to be working
effectively. Unnecessary or redundant controls should be identified and
eliminated. The nature and purpose behind corporate governance regulations
needs to be recognised by management and properly embedded within the
organisation. The purpose of this element is to measure the degree and evaluate
the effectiveness of how the anti-fraud and corruption controls have been
implemented.

5.
Training and awareness programs
Training programs should be practical in nature, cover a wide spectrum of risks
and apply to all employees. Training should be assured for third parties, when
their activities are closely integrated. The training should be held at regular
intervals and structured to encourage feedback and sharing of information and Fraud