Fraud at Tesco

As the Financial Conduct Authority announces its investigation into the affairs of Tesco, questions about how and why the Company overstated its profits earlier this year are rife. Until the outcomes of the investigation are known, the answers are speculative. Regardless of whether or not that understatement was intentional and if so, the extent to which senior executives were complicit, the damage has and continues to be done to the Company. Its value has fallen by £150bn since this issue came to light. News that the Financial Conduct Authority is to investigate Tesco over this incident wiped another 5.5p off the share value as soon as trading opened. In the fiercely competitive world of food retailing, its competitors must be rubbing their hands as a major competitor struggles. Or are they? Perhaps this will focus their own minds on the accounting practices that exist within their own companies having seen the damage that can be caused if it goes array. If it doesn’t – then they could suffer the same fate, as this is a real risk and any company that fails to learn, learns to fail.

In the first instance this is a failure of risk management – hindsight is a wonderful thing possessed by all of us. Foresight is the gift of good executives and managers who use every tool at their disposal to consider what the threats are to the organisation and put plans in place to mitigate against them. Didn’t see this coming might be the plea. Well look around. There have been numerous episodes in the recent past when the actions or inactions of people in organisations have had serious consequences. In a sector where public confidence and loyalty are vital, arrogance and ignorance must be avoided in equal measure.

Has someone set out to deceive in this case? Deliberately misleading shareholders, auditors, regulators and customers is a ‘lie’ in any language. If deception is proven in this case, committing that deception to print is a commissioned lie and indefensible. At what point in the Tesco risk and financial management systems should this have been identified? It is hard to imagine that a company the size of Tesco doesn’t have comprehensive systems in place - but still this issue occurred.

Sex, drugs, corruption, and illegal/inappropriate sexual behaviour by senior executives have all been played out in the media in recent years. Do they appear in the risk management matrices of major corporations? Who knows? If they don’t then they should and so too should the control measures to reduce their likelihood and impact. Knowing who works for you and what their relevant characteristics and behavioural traits are is therefore essential, along with any previous indiscretions that may have slipped under the normal screening radar.

Maybe this could help?