Fraud comes in a great many guises, causing great detriment to UK businesses and resulting in annual financial losses for the UK economy of £85bn. The constantly evolving nature of fraud makes it impossible to stop. As a new measure is imposed to prevent a particular area of fraud, another scam is born that exploits a new weakness entirely.
Businesses like RMonline have greatly helped to reduce the level of insider business fraud by making it easy for individuals to check the past credentials of potential partners and high level employees before hiring decisions are made. Business owners can simply check their track record in business using fully analysed reports on all UK Limited Companies. In fraud cases, prevention is certainly a lot cheaper than the cure. Recent research in China has shown that gender diversity could be another effective method of combating fraud.
The research findings
Three professors from Hong Kong and Chinese business schools conducted a study into the effect of an increased female presence on the boards of a number of Chinese businesses. The findings indicated that a greater balance between the genders sitting on the board of directors leads to a reduction in the instances of fraud within those businesses.
The study’s primary focus was on the level of securities fraud, which involves the misrepresentation or deceptive use of information with the aim of duping investors into making purchase or sale decisions which benefit the company as a whole, or an individual.
The findings do not suggest women are innately more honest than men; instead, they show just how important gender diversity is to creating a behavioural balance, resulting from the differing financial outlooks of men and women. The research alluded to women being inherently less-confident in regard to financial matters, while men are more prone to rash financial decisions which might fly in the face of shareholder interests.
The benefits of diversity
The Chinese study closely examined over 1,400 reported cases of corporate fraud over a ten-year period, uncovering strong evidence to support the premise that male-dominated boards are more susceptible to fraud.
It is estimated that businesses across the globe lose five percent of their total revenue to fraud every year. However, it is believed the level of fraud could be reduced by embracing diversity at the higher-end of the hierarchy.
- Actively hiring women helps to broaden a business’ talent pool
- A more diverse workforce leads to a greater divergence in opinion, improving discussions and ultimately decision making
- Improved discussions increase the scrutiny of internal of decision, reducing fraud as a result
In a utopian world, women would enjoy equal representation on the boards of large businesses; however, there is currently no country in the world where this is the case, with the figure closer to five percent in supposedly progressive nations such as Germany, Denmark and France. So, could quotas for the number of women on company boards be the answer to a reduction in fraud? Norway seems to think so, having already implemented its own quotas. It is yet to see whether the rest of the world will follow suit.
Do you agree that more gender diverse boards result in improved decision making? Have you ever experienced an overtly male board resulting in instances of fraud? We’d love to hear from you, so please leave your thoughts in the comments section below.