Scenario planning refers to a tool that can be used to tactically evaluate risk. In this disciplined method, the organization sets or imagines a possible future and then takes actions to ensure that any negative future outcomes do not occur. The main objective of the scenario planning is to come up with a description of assumptions, conditions, variables, as well as, relationships regarding present business processes and then scrutinize the result if there are any changes in the future. The scenario planner is involved with capturing and interpreting difficult outcome patterns through the integration of subjective information and quantitative data. After determining the possible future, the planner draws markers in the near-term to pinpoint the assumptions that will come true. Thereafter, the management can take precautions to avoid any negative happenings before they shape up. Scenario planning involves active imagination, excellent visualization skills, and clear understanding of the relationships and processes involved in the study. It is vital for the company to eliminate fraudulent behavior completely to avert shameful media portrayal and customer loss. The company would only achieve this by remaining focused on effective strategies aimed at solving the problem relating to fraud.
This paper explicates the scenario planning approach and the manner in which it will help the problem of fraud in the company.
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Roles of Different Elements of the Plan
The top management, middle level management, internal audit, legal counsel, audit committee, and the corporate security would play key roles in ensuring the success of the plan in reducing future frauds within the company. It is worth noting that the top management would play the key role in determining objectives, effective policies, and operations of the scenario planning approach to eliminate the future frauds in the company. This implies that the top management would give an effective guide concerning the manner in which the entire plan is to be conducted. It would formulate decisions it perceives effective to the success of the project aimed at reducing future frauds in the company. The middle level management would play the role of giving recommendations and advising the top management pertaining to the operation of scenario planning in the reduction of future frauds.
Rhydderch (2006) asserts that internal audits would also play a vital role to reach success of the project. Notably, internal audit would play the role of evaluating and providing reasonable assurance that risk management, control, prevention, and governance systems are functioning as desired hence enabling the organization realize its goals and objectives. This implies that internal audits would play the role of giving management feedback concerning the activities undertaken to prevent future frauds. Corporate security would play the role of protect the company and prevent any future loss from happening. It acts as the defense to the company by offering effective protection against any form of fraudulent behaviors. In line with its defensive roles, corporate security would monitor and measure the integrity of members working in different departments within the organization.
Additionally, the audit committee would play the instrumental role of helping the top management discharge its duties in line with financial information, audit reports, and corporate codes of conduct. It would promote significant operations towards curbing future frauds by ensuring that the top management understands the nature of financial statements and any other aspects relating to them. Axson (2011) reiterates that the audit committee would determine the accuracy and reliable of the presented financial statements of the company. The legal counsel would play the role of developing the scope for risk assessment hence ensure adequate focus on the core objectives and plans of the organization. This implies that the legal counsel would advice the company on matters pertaining to the risk levels, hence, enabling it work accordingly to the intended objectives. All the roles played by different parties would be vital in ensuring the objectives of the company relating to curbing future crimes are attained at the appropriate time. The plan would be able to run effectively as these roles are effectively performed.
The Key Drivers of Fraud at the Company
The frauds within the company are likely to be driven by the lower integrity levels of members and the processes involved in the organization. It is worth noting that most members within the organization have found it difficult to maintain effective integrity levels that would promote excellent performance and avoidance of fraudulent activities. Most employees in different departments have been tempted to breach the levels of integrity and commitment they pledged to work with. Most members of the organization have found it difficult to keep their integrity levels as they are influenced by others who indulge in the similar act. The influence is immense and has ensured that they too take part in fraudulent activities in the organization. The processes that are involved in the performance of activities in the organization have also influenced the levels of fraud in the organization. The organization has put in place procedures that are meant to ensure smooth running of activities. The long procedures utilized within the organization have also contributed to the high levels of fraudulent activities in the organization. Some employees have taken advantage of the loopholes existing in different departments within the organization. The organization tries to promote efficiency, but the some members still take advantage and defraud the organization of significant resources. The organization has been struggling to overcome the different types of frauds to no avail. Scenario planning would be an effective plan for fighting future frauds in the company because it would ensure different members to be vetted appropriately and determined suitable for the performance of the responsibilities of the organization. Rhydderch, Scenario Planning (2009) asserts that the procedures adhered to in the delivery of services within the organization are related to lower integrity levels among members in the promotion of frauds in the organization. The members take advantage of any loophole to compromise their integrity and defraud the company.
Experts’ opinion on the use of strategic planning in business organizations
Strategic planning in the past has always been seen as the official future. Many accounting departments of organizations have been generating trend lines but lacked qualitative differences and demographics discussions. While these guesses have been good, they fail to look into qualitative social changes that can affect any organization or business. More often than not, scenarios are linked to the joint effect from a number of factors. According to experts, scenario planning helps the organization to understand how strands of a difficult tapestry are affected if one or more threads are affected.
When scenario planners explore all the factors together, they find out that specific combinations could amplify the likelihood of an impact in the future. For example, fraud can lead to an economic recession, which could reduce domestic production due to the deficit of jobs. Scenario planning involves understanding two things: first, the things the organization believes they know about, and secondly, the elements they consider unsure. The first includes trends, which is crucial in casting the past forward. Accvording to Axson (2011), the second component is made up of indeterminables like innovation rate, future interest rates or fashion among many other things. Scenario planning, therefore, is composed of mixing the known and unknown to determine a wide array of future possibilities.
A number of organizations like Dutch/Shell have used scenario planning to evaluate their strategic options. Notably, scenarios are beneficial because of the alternative future flavors offered by their different perspectives. When the scenarios finally materialize, the participants will be perplexed by what they offer; it finally becomes a genuine framework. Nonetheless, it is crucial to ensure that scenarios become consistent to avoid going back to rectify the issues that may arise. Building a scenario is an iterative procedure. It takes several meetings as participants refine their ideas regularly. Scenarios may be defined as an artificial framework, or a logical device, which presents the planner with topics or factors that can be easily used by the manager.
Use of scenario planning by managers
The overall process of scenario planning involves environmental analysis, scenario planning, and corporate strategy. Environmental analysis is the same kind of analysis that needs to be taken as the first steps in any meaningful long term planning. Scenario planning encompasses the main techniques, which distinguish the scenario estimation process from the rest in the long term planning. The final group strategy planning involves all the remaining steps that go towards producing the plans and corporate stratagem. The still follow the same rules involved in long range planning although the requirement can be somehow different.
To avoid overstatement of receivables, it is essential that a proper maintenance of financial statements indicating the exact receivables.
To prevent kickback scheme involving senior purchasing agents, it is essential to put effective internal control mechanisms.
To prevent theft of inventory, it is essential to put in place effective inventory control strategies, which will ensure frequent stock taking of the exact figures.
It is important to test all the scenarios mentioned above. Rhydderch (2006) asserts that every stakeholder will have their part to play in testing these scenarios.
Identifying the issues arising
As the final stage, it is essential to study these scenarios to understand what the most decisive outcomes are. The succeeding strategy will need to address all the issues rather than gambling on a single outcome.
It is essential to note that scenario planning entails the planning that depends on logical assessment of the future by imagining possible and steady events that might happen. It is a judgmental procedure that comprises of written, anonymous, multi-stage review procedure and requires group opinion at every stage. The different forms of fraud discussed above might happen in the future thus affect the organization in a negative way. Therefore, it is important that the company’s management team imagine of these scenarios and put in place mechanism that can be used to prevent future frauds. As stated earlier, scenario planning involves understanding two things: first, the things the organization believes they know about, and secondly, the elements they consider unsure. The organization knows about the type of frauds that have already taken place. However, the management team is not sure of what other forms of frauds that will happen. The scenarios created above touches on all type of frauds. Proper maintenance of financial statements indicating the exact receivables, putting effective internal control mechanisms, as well as, effective inventory control strategies, are strategies that will ensure all forms of frauds are dealt with.