Setting the Stage to Fight Fraud

Using ‘Scenario Planning’ to Prevent Crime

By By David McNamee, CFE, CIA, CISA, CGFM

Television police dramas typically portray investigators piecing together clues in the aftermath of a puzzling crime. They build a theory about how the crime was perpetrated, concealed, and – if theft was involved – converted into personal gain. Every step of the crime is analyzed as the investigators ask: When did it happen? Why did it happen? Who had access? Who may have observed the act? How did the perpetrator cover his tracks or dispose of his ill-gotten gains?

The information then is assembled carefully into the case framework until a likely series of events emerges. By understanding the whole, the television investigators build a picture of the crime and the characteristics and probable actions of the perpetrator. These characteristics help identify a likely suspect or pool of suspects who then face searing interrogations until eventually someone confesses.

Not unlike the detectives and investigators of television, fraud examiners build theories, gather information, and develop leads that point to suspect business operations or employees.

But imagine if fraud examiners could bypass the entire investigation process and actually solve the crime before it happened! By using a risk assessment tool called “scenario planning,” this may be a real possibility.

The Power of Scenario Planning 

Scenario planning is a device used to strategically analyze risk. It is a disciplined method for imagining the future or a set of possible futures and then taking measures to ensure that any negative “futures” do not unfold. The essence of scenario planning is to create a narrative description of conditions, assumptions, variables, and relationships about present business operations and then examine the result if any changes were to occur in the future. The scenario planner tries to capture and interpret complex patterns of outcomes through combining quantitative data (numbers, ratios, and statistics) and subjective information (observations, impressions, and thoughts). Once the hypothetical future or set of futures are determined, markers are drawn in the near-term to identify which assumptions are coming true. Management then can take positive steps (or precautions) to deter any negative scenarios before they develop.

Scenario planners need good visualization skills, an active imagination, and a thorough understanding of the processes and relationships under study. No other tool is as powerful for challenging assumptions. Peter Schwarz, president of Global Business Network, a consulting firm specializing in strategic planning using scenarios, views the scenario approach as a way to “lift the blinders” from our eyes and discover our creative problem-solving skills. The narrative process enforces a certain logical story development that can aid in expressing hidden assumptions.

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