Digital Age Compliance
The Serial Fraud Cases in Japan in 2017 and the Limit of Mura Society
In September 2017, a major Japanese car giant announced that non-certificated employees had been conducting tests on their automobiles. A month later another industry giant also announced inappropriate automobile testing processes. Subsequently in November, two other Japanese major name manufacturers announced data falsifications. Investigations to date indicate the cause of these issues to have been a “lack of compliance”. However, an important question these incidents have raised in order to understand this issue for the future, is “why now?” and “why could they not hide these issues anymore?”
Compliance Program Became a Dead Letter
“Fraud will never disappear” is a commonly said phrase in risk management. If this is true, it is a waste of time to take measures which aim to completely prevent risk. However, preparing strategies to minimise damage is of utmost importance for a company’s future prosperity, reputation and survival. To minimise the damage caused by fraud, it is critical to assess where the risks are, what the damages would be (risk assessment) and to prepare appropriate risk management measures.
It is not sufficient to just have a risk management system or a compliance program, it needs to be a system and a program that actually works as it was intended to. Even if a company has nicely worded and structured policies in place, it is always human error, a misjudgement or an individual wilfully exploiting an opportunity that results in violation. Risk management and compliance systems ultimately rely on each individual employee’s “awareness” as to whether or not fraud occurs. The crucial factor is whether the systems can have a strong influence on this “awareness”.