The Domino Effect: How Fraud Disrupts Organizational Trajectory & Trust

- [Narrator] Impact of
fraud on organization.

No organization is safe
from the serious damage

the fraudulent activity may impose.

Chances of occurrence of fraud cases

are present in all types of organizations,

whether large or small.

The effects of occupational
fraud may be pervasive,

resulting in devastating
financial, reputational,

and operational losses.

In large organizations, the scale of fraud

is also usually large,
resulting in huge losses

causing depletion of profitability.

These organizations
employ a large workforce

deployed in different locations
to perform different roles.

Weak controls over a
large number of employees

increase the chance of occurrence

of significant fraud incidents.

Fraudulent activities have
significant negative consequences

for the organization's
shareholders, investors,

and key executives.

Organizations where large scale frauds

are reported to have experienced

a decrease in stock prices
and loss of market share.

Large scale frauds may
result in bankruptcy,

delisting from the stock
exchange, assets, disposals,

and change of senior management.

These changes are directly linked

to the long-term success
of the organization.

The corporate changes resulting

due to the fraudulent activities,

lower the morale and confidence

of the customers, bankers and suppliers

resulting in loss of
operations and growth.

Customers always prefer to buy products

and services of those organizations

which have a history of
a positive relationship,

transparent processes,

and focus on customer care.

In case of publicly
reported significant frauds,

the customers switch their buying

with other reliable and
trustworthy competitors.

The decline in market share

and profitability levels

results in cashflow problems

and working capital issues.

Financing needs are not fulfilled

and the organization is exposed

to the risk of bankruptcy.

Frauds may also occur

in the financial statement
preparation process

where organizations with
weak financial performance

try to hide the weak financial performance

and position through window dressing.

Fraudulent financial reporting
misleads the investors

and shareholders to
contain their confidence

in the organization.

Fraudulent financial reporting

usually occurs when the organization

initiates complex trading transactions

such as hedging and derivatives contracts.

Negative results from
these complex transactions

tend to deplete the cash

and profitability of the organization.

Therefore, the organization
uses the window dressing mode

of preparing the financial statements,

concealing real financial
performance and position.

(upbeat music)