Leadership Using Internal Controls for a Decentralized (Remote) Workforce

Leadership Using Internal Controls For A Decentralized (Remote) Workforce

During the post-Covid environment, more employees work remotely than ever before. Leaders will want to be aware of areas of risk related to protection of their entity's assets, reputations, and societal goodwill, that are more vulnerable with a decentralized (remote) workforce. An entity's leaders cannot make first-hand observations of hardly any employee activity in a remote environment without the proper internal controls. With this new trend of a remote workforce comes new challenges for leadership to effectively manage their entities.

Backing up in time, in a pre-Covid environment when most workers performed their service on company property, it was significantly easier for supervisors and managers to observe employee performance. Managers could physically see work being performed, or lack of work being performed (if employees are goofing off, making blunders, or botching their work product). Additionally, communication was different in the pre-Covid environment when most employees were working on-site, in that office discussions were more easily held and did not have to be intentional, where a comment could sometimes point a manager in the direction of a potential issue or trend. In the pre-Covid environment, managers could also more closely observe how much time their employees spent on many tasks.

The company assets discussed in this chapter with respect to protecting them in a decentralized work model include cash, customer billings, inventory, computers and similar equipment, data, expense report reimbursements, payroll checks, time and engagement, and company reputations (as affected by customer service, social media, and corporate social responsibility). All of these assets require specific protections and the prescribed controls for each are a bit different from each other. The ideas included in this chapter may not be all inclusive.

While some may not think of a company’s reputation as an asset, indeed it is if you think of companies that have suffered a downfall due to a poor reputation. Reputationsciences.com (2021) states that corporate culture, social responsibility, company leadership, financial performance, customer sentiment, and products & service all make up a company’s reputation. Reputationsciences.com lists these companies has having bad reputations at the beginning of 2021:

• 1.

  Phillip Morris-Tobacco companies have faltered as smoking has been determined to cause cancer.

• 2.

  Sears-Store closings and falling customer interest in their brand has hurt Sears.

• 3.

  Comcast-Being saddled with many lawsuits has caused Comcast to struggle.

• 4.

  Facebook-Accusations of not managing customer privacy and allowing manipulation of the 2016 U.S. presential election have lessened Facebook’s reputation, although Facebook still seems to have a strong foothold.

• 5.

  Goldman Sachs-Reputation damage due to the 2008 financial crisis in the U.S. still haunts Goldman Sachs.

This chapter first discusses very general information about controls, and then moves to the more specific.

Fraud Triangle- The fraud triangle helps explain why employees may make the decision to commit fraud and theft against their employer. As Dorminey, Fleming, Kranacher, and Riley (2010) explain, the fraud triangle can explain why employees can be motivated to commit fraud against their employer, and these motivations are still very much (or more) at play in a remote work environment. The three sides of the fraud triangle include perceived financial pressure, rationalization (moral justification), and perceived opportunity to commit and conceal a theft. See Figure 1 for the three sides of the fraud triangle.

Figure 1.

The Fraud Triangle

Dorminey et all also describe a fraud diamond, that adds a fourth variable called “fraudster’s capabilities”. See Figure 2 for the Fraud Diamond.

Figure 2.

The Fraud Diamond