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FORENSIC

FORECAST
2015

Forensic Forecast 2015


Economic uncertainty, increasing regulator activity and the rising
prominence of class action lawyers has altered the risk appetites
of Directors, Senior Executives and their advisors.
With Australian business confidence
and economic conditions continuing
to be subdued, we anticipate that the
following themes will continue to be
present in 2015:
--Directors and Senior Executives fully
integrating risk management into
strategic business decision making.
--New ways of using experts - earlier and
greater involvement for mediation,
independent determinations,
arbitration and assessment panels.
--Unlocking the value of Big Data increasing focus on the use of analytics
to manage risks, minimise revenue
leakage, manage costs and increase
the reliability of financial forecasts.

--Contract reviews assessing the


consequences of contract leakage,
such as poor contract management
processes, inadvertent supplier
overpayments or outright fraud.
--Proactively protecting intellectual
property and sensitive business
information.
--Increasing use social media as a rich
source of evidence in litigation or
when used by investigators on fraud,
corruption and employee misconduct
matters.
Whatever the year ahead brings,
proactively managing risk and seeking
sound advice will stand you in good
stead.
McGrathNicol works with Boards
and senior management to achieve
successful preventative and responsive
solutions to manage investigations,
disputes, contracts, technology
and commercial irregularities and
obligations.

Matt Fehon
Partner - McGrathNicol Forensic

E-Comms
Ed et rempor alignissum volupit iorest explit, ut remqui nim
animped modis pa invenihil magnis evelest, voluptibea core.

Off the shelf? Outside the square? The


term Big Data is frequently being
thrown around. Data and information
belonging to companies and their
employees is challenging to control.
Recent events have highlighted
the importance of an organisation
proactively seeking to gather
available information to establish
behaviour, communication and
networks of individuals to monitor
the pulse of the organisation. Using
this information to enhance an
organisations understanding of its
culture demonstrates the commitment
regulators and media are now
expecting.
Companies and Government
agencies are optimising the electronic
communication solutions to not only
help in identifying those bad apples
but to also understand what is and isnt
working within the organisation.
Interest in the culture of an
organisation increased dramatically in
the wake of the GFC with Governments,
regulators, Boards and companies

wondering how and why everything


went so wrong. Was it the work of a few
bad apples? Or were their fundamental
issues with the organisational culture
that management should have been
aware of?
Our analytics team produces
sophisticated solutions to optimise the
monitoring and analysing employees
electronic communications and social
media, providing the ability to:
--monitor varies compliance related
activities;
--map and understand communication
networks and patterns;
--analyse staff productivity;
--analyse communication content for
potential red flags; and
--model the emotional content of
emails.
In this day and age, what you dont
know can hurt your business. When the
regulators or the media come knocking
will the defence, we werent aware
really cut it?

Contract Assessment
Ed et rempor alignissum volupit iorest explit, ut remqui nim
animped modis pa invenihil magnis evelest, voluptibea core sercien
delicitio.
Organisation cost consciousness will
continue to be the norm throughout
2015 with the focus on examining
contracts to reduce or recover costs.
Acting on this before litigation is the only
remedy is good contract governance
and the most likely to prevent losses.
Inherently managing contracts presents
a wide range of risks and issues, which
operationally can be difficult to manage.
Over the past five to 10 years many
of our clients have taken proactive
approaches to contract management,
whilst others are left dealing with
contractual disputes that may have
been avoided. Disputes regularly
concern matters such as claiming the
reimbursement of costs not permitted
in the contract, overcharging or
falsifying claims for hours and materials,
variations, duplication of charges,
claiming of overheads and in some
instances fraud, bribery or corruption.

Companies often overlook the leakage


that occurs in existing contracts, the
capacity to claw back overcharges and
generally realign supply chain practices.
Some of the red flags of fraud and
leakage are:
--poor contract management (principal
and contractor);
--contractor showing signs of financial
distress;
--projects not meeting budget,
milestones or deadlines;
--multiple variations to contracts; and
--projects in remote locations.
Organisations should be employing both
proactive and reactive initiatives across
various stages of a contract lifecycle
to ensure each phase is managed
effectively.

Social Media
Ed et rempor alignissum volupit iorest explit, ut remqui nim
animped modis pa invenihil magnis evelest, voluptibea core sercien
deliciti.
Social media is becoming an increasingly
valuable tool and rich source of
evidence. Information posted on
platforms such as Facebook, Twitter,
LinkedIn and Instagram can provide
invaluable data, including a users
location, time of activity, comments
and posts, photos, networks and profile
information.
With the increasing use of both social
media and cloud-based storage sites,
forensic technology faces a number of
challenges for organisations, including:
--security such as profile accounts that
have been set to private;
--no physical access to the data (stored
on centralised servers around the
globe);
--capturing social media for evidence;
and
--privacy laws.
Social media has become strong
circumstantial evidence in our
investigations into employee
misconduct. These include theft
of intellectual property, leakage of

confidential information to the media,


large-scale fraud and corruption
investigations.
The use of social media to assist with
investigations and litigious matters will
continue increase in 2015.
Organisations should be asking
themselves, How do we respond to
the inappropriate use of social media?,
What can be used from an evidentiary
point of view to assist in investigations?
and Are we proactively managing
social media?. It is imperative that your
organisation has formal social media
policies and procedures in place.

Consulting Experts
Ed et rempor alignissum volupit iorest explit, ut remqui nim
animped modis pa invenihil magnis evelest, voluptibea core sercien
delicitio.
In recent years, commercial managers,
in-house legal counsel and their
external legal advisors have been
contributing to an increasing trend in
forensic accountants being engaged
as Consulting Experts. A Consulting
Expert is engaged as an advisor to
its client and advises outside of the
impartiality restrictions encountered by
independent expert witnesses. There
are a number of reasons why the use of
Consulting Experts is gaining traction in
Australia, for example:
For the Plaintiff:
--Assessing the possible financial
outcome of a complex claim.
--Assisting with framing the case.
--Identifying the financial information
required to support the case.
For the Defendant:
--Undertaking financial analysis at an
earlier stage of the litigation cycle can
provide a quick and high-level financial
appraisal and avoid costly surprises.

--Preparing a scenario analysis of a range


of potential financial outcomes in
complex claims.
--Providing financial analysis to assist
with the litigation strategy, including
on receipt of a genuine steps
statement to facilitate resolution of
claims prior to the commencement of
the proposed proceeding.
--Assisting with discovery to sense
check financial information provided
to the Plaintiff.
--Stress testing independent expert
witness opinions.
With the proliferation of Plaintiff
law firms, litigation funders and the
number of Class Actions in Australia,
organisations are now making the
strategic decision to have a Consulting
Expert on board early to save money
down the track.

Regulatory Investigations
Ed et rempor alignissum volupit iorest explit, ut remqui nim
animped modis pa invenihil magnis evelest, voluptibea core sercien
delicitio.
Following a year of heavy vilification,
the Australian Securities and
Investment Commission (ASIC) has
signalled an upsurge in regulatory
investigations in a move to restore
trust and confidence in financial
advisers and to stamp out criticism of
the regulators responsiveness and
willingness to crack down on the big
end of town.
Several financial licensees have come
to ASICs attention for widespread
failures in their systems and controls.
ASICs industry report into life
insurance advice found more than
one third of the advice consumers
received failed to comply with the
laws relating to appropriate advice
and prioritising the needs of the
client. The report also found that
45% of advice failed when high
upfront commissions were taken,
compared with a 93% pass rate when
other forms of commissions were
used.

In response, some of ASICs


initiatives include:
--strengthening its surveillance of
financial advisory arms of banks and
financial services companies;
--enhanced use of data mining to
actively monitor patterns across
markets;
--increased surveillance aimed at
deterring illegal phoenix activity;
--establishing a national register
of the 14,000-15,000 financial
advisers; and
--considering a program for
mandatory education of financial
advisers.
Despite what appears to be a
credible effort by ASIC to change
public perception, Australia
remains a paradise for white
collar criminals according to ASICs
Chairman, Greg Medcraft. It is
critical for organisations to develop a
governance structure that mitigates
unforeseen damage.

www.mcgrathnicol.com

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