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?

Drug Screening in Sports

To the outside and casual observer, the way in which the Commonwealth Games in Glasgow have been both organised and competed in, appears a triumph. For those of us who participate from the sidelines and the comfort of our armchairs there has been much to savour.

The hours and hours of gruelling effort and self-sacrifice that so many of the athletes must endure in order to compete at that level is to be praised and respected. As one who moans about the prospect of walking to the local post office, I cannot imagine what it must take to train day after punishing day! As a result I feel very sorry that those dedicated men and women have to compete against some in their number (a minority I am certain) who seek to enhance their performance by the illegal use of drugs and other substances. Not only are they cheating clean athletes, but also they are guilty of raising doubts in the minds of those of us who spectate about the means by which those who do medal achieved their success.

As humans we are forever striving to reach further and further and push harder and harder; whether that's in technology, exploring the cosmos or pushing our physical limits which is what these athletes are doing. When this happens and limits are pushed (Usain Bolt or David Rudisha as examples) the status these people achieve is rightly deserved; however, if there is that cloud of suspicion and doubts in the mind of the audience due to others use of drugs, would that status ever be reached? Would people actively push themselves and break those limits if they were only to be greeted with suspicion from those who are watching and ultimately elevate them to a higher status? Unfortunately a number of athletes at the Glasgow Games have tested positive for drugs: Gareth Warburton and Rhys Williams from the Welsh team and gold medallist weightlifter Chika Amalaha, but how many haven't been caught?

This article by the British Medical Council is extremely interesting and covers both human boundaries and the issue of drug use.

The Commonwealth Games is not the only sporting spectacle to be put in this position. In spite of the existing drug testing regimes, there are clearly ways and means to work within and around the system; or at the very least provide the opportunity for those who believe the reward is worth the risk to take the chance. It would be naïve to believe that drug use in sports isn’t institutional in scale, given the numbers competing across the globe and the fact that bodies such as WADA exist to detect it. Do those competitors who use drugs believe they can act with impunity (the likelihood of detection being slim) or is their detection more to do with getting the timing wrong in the run-up to competition?

If the existing detection/deterrent value is not enough to eradicate the problem then is it time to consider a different approach by adding a new weapon to the arsenal? Polygraph testing has both detection and deterrent capabilities and when validated techniques are used by competent examiners, the success rates are very high. This is particularly the case when investigating historical crime or wrong-doing – abstinence in this case does not remove the evidence, or in this context the memory of the event! If those responsible for getting sport to clean up its act once and for all are serious, an in-depth consideration should be given to using this technique, and perhaps then that cloud of suspicion may be dispersed.

Effective Screening

How can an organisation manage the hazards associated with personnel selection and appointment? Recognising that a problem exists is perhaps the starting point, followed by a good, robust business continuity, risk management and HR policies and procedures in place to address it. Whilst much attention has been focused in recent times on preventing and detecting financial impropriety at the highest level in major corporations, risk exposure occurs at every level and in each and every section of an organisation; a factor which is still apparent due to the high number of cases that have come to light retrospectively having been detected rather than prevented, suggesting many existing HR and risk management processes and finding it a challenge to effectively prevent the risk occurring in the first place. Risk is not exclusively linked to the money or the power base.


Government clearly has an interest in the risk associated with the financial world and the corporations that control it, especially when an occurrence can impact the British economy and thereby influence the outcome of an election! The Conservatives and Liberal Democrats made much of the apparent link between the financial crisis in 2007 and Labour's mis-management of the economy and lack of control over the financial institutions in the last election. It was lucky or unlucky depending on your political perspective that a Labour Government was in power at the time - would a Conservative Government have faired any better? Would it have had the necessary systems in place to prevent, detect or deter it? Hindsight is, as always, a wonderful thing!


The gift of hindsight is not exclusive to Government, every organisation has it. The trick is, having the means by which its use and subsequent 'hindsight is a wonderful thing', can be avoided. Foresight and foreseeability are by far the better means to manage risk. In relation to the financial corporations and institutions, conduct (or perhaps more appropriately misconduct) is a core and current issue, with the vast wealth having the power to sway even the strongest of minds. How does one ensure compliance with the rules, procedures, codes, and something less prescriptive but nonetheless important, societal expectations associated with good governance and transparency? After all, it is society that elects, and deselects, a government.


The first question therefore for those with responsibility for such matters is to what extent and by what means does the organisation assess risk? Employee-related risk exposure in particular (the human element of an organisation) is an area that needs to be assessed? The supplementary question is, what processes, procedures and tools are available to help manage and control it in order to reach the highest level of prevention. When it comes to fraud prevention, detection and deterrence are key expectations for those who regulate; audit and process controls can address the mechanics but what about the 'soft' hazard - those involved in the misconduct, the element open to human interoperation, interaction and often error?


How do HR professionals assess risk prior to people selection and managers during appointments when in role? Understanding the psychology and behavioural characteristics of employees is key to establishing how likely it is that an individual will break the rules, and whether or not they have an undisclosed history. The history that is not highlighted in standard screening procedures which those individuals (particularly in the finance sector) who have exposed a company to risk, have been through already? 

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