FRAUD MANAGEMENT AND ORGANIZATIONAL PERFORMANCE OF MONEY DEPOSIT BANKS IN NIGERIA
Abstract: This study investigated the effect of fraud management on organizational performance. Two objectives of the study, two research questions, and two research hypotheses were formulated for the study. The study was conducted on deposit money banks in Nigeria; the unit of analysis compromised of bank managers and organizational leaders. The study adopted a cross-sectional survey of quantitative research design. The population of the study consisted of 10 randomly selected banks. The study adopted the Taro Yamen sample size determination technique to determine a sample size of 161 respondents. Data was collected through a close-ended structural questionnaire to elicit and gather data. Descriptive statistics were used to analyses the demographic data of respondents while the standard mean was used for the univariate analysis (respondent’s analysis of the questionnaire). Pearson’s product-moment was used for the bivariate analysis (test of hypotheses). After the testing of hypotheses, the study found that if fraudulent activities are not properly checked, managed, controlled and detected on time it will be hard to prevent and as such will negatively impact the performance of money deposit banks. The study, therefore, recommended that Money deposit banks should adhere to laid down policies to avoid liquidation. Money deposit banks should tackle fraud activities head-on without any form of compromise. Giving the rate at which fraud is committed, money deposit banks should incorporate the use of technology and ICT elements in its operations. The researcher further suggested areas to enrich the current study.
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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The present-day business environment is marked by different dynamic features such as global competition, information technology, quality service revolution and corporate social responsibility which are compelling managers to rethink and reshape their approach to their various operation responsibilities. Due to this paradigm shift, new firms are emerging that are more responsive to both their internal and external environments for performance (Luthans, 1995).
Organizational performance is the ability of a to measure firm to prudently use its inputs for a better output consistently i.e. the managerial process of directing the affairs of a firm regularly on a going concern basis and meets the needs of all stakeholders (Akindele, Anywanu, and Bello, 2012). Dun and Bradstreet (1979) viewed organizational failures as a situation where an organization go into bankruptcy or cease operations which results in losses and failure to meet its various financial commitment to creditors. In order to perform well, firms always keep a close tab on the various activities that determine their continuity. Adeoye (2012) submitted that the present form of complexities facing firms include leadership styles, changes, uncertainty, conflict, culture, technology, structure, competitive market, profitability, and workplace motivation. Hence, firms must develop a strategic plan and tactical procedure that is appropriate and adaptive to the present business environment that will aid the utilization and attainment of its optimum resources of set goals for better performance
According to Abdullahi (2007), many factors militate against the performance of an organization be it financial institutions, government institutions and to large extent private institutions. One of those major factors is fraud or corruption
Business practices in Nigeria have been marred by incredible waves of fraud, involving misappropriation of funds, cheque forgeries, funds diversion, etc. While the public concern is growing by the day and management vigilance improving with the aid of computerization, it is on record that millions of naira is lost to fraud and forgeries (Stanley, 1994).
A short definition of fraud as outlined in Black’s law dictionary is an act of international deception dishonesty perpetrated by one or more individuals generally for financial gains. According to Robertson (1976), fraud is any deception practiced to cheat or deceive another to his own detriment or to the detriment of any other, or to cause another loss or injury, while the perpetrator has a clear knowledge of his deliberate falsehood, deception or advantage over the innocent and unsuspecting victim. These two definitions established the fact that the person perpetrating the fraud action is fully aware of his/her action. Companies put policies and procedures in place. An employee committing fraud circumvents those policies and procedures (Sander, 2015). An employee committing fraud is not making a mistake but deliberately circumventing the system. The employee uses various methods to conceal his/her actions. Lies are told, documents are falsified, transaction recording is misrepresented, and internal controls are abused (Sunder 2015). Occupational fraud is very difficult to detect. Accountants and auditors have often been exalted to be the leaders in fraud prevention by employing their skills in designing control systems. Control systems limit trust, limit employee’s initiatives and in the extreme can strangulate business organizations with bureaucracy (Hamiltion &Gabriel, 2014).
Fraud can be referred to as an act of deception, carried out for the purpose of undeserved or unlawful advantage. It is a civil or criminal wrong that may result in loss of money, documents, and properties. It can be in the form of assuming a fake identity (or assuming someone else’s details like social security numbers/national identification number), forgery, falsification of documents or perversion of truth and counterfeiting. Fraud management can refer to the real-time screening of transaction activity across users, accounts, processes, and channels, to identify and prevent internal and external fraud in an organization. Fraud management tools are employed to evaluate the variation between related users, related accounts, and other entities, to identify unusual behavior that could be a sign of criminal activity and fraud. In 2016, the World Bank’s Ease of Doing Business Report ranked Nigeria the position out of 189 countries in the ease of doing business. This implies that Nigeria is faced with so many challenges when it comes to doing business. 80% of new business organizations and startups in Nigeria fall within the first three years of commencing operation. This is caused by a variety of challenges these organizations have to face. Among the challenges that are faced by businesses, organizations are access to capital or credit, electricity and power supply, government regulations, market development, corruption, bribery, and fraud. Abdulahi (2007) opined that most management of organizations in Nigeria has failed to internalize the norm of not using funds for a purpose other than their intended use. The indiscretions are not only symptomatic of large financial abuses but have a serious negative effect on encouraging malpractices and maladjustments in business operations. Hence the need to adopt a fraud management practice to proffer solutions to different fraudulent activities and ensure the performance of the organization. Fraudulent activities in organizations have been identified to be one of the major killers of business organizations in Nigeria. Fraud losses continue to impact on the most organized and the costs of fraud are transferred to society in the form of opportunity costs, increased customer inconvenience, outrageous high prices for goods and services, and criminal activities funded by the fraudulent gains. The business environment in Nigeria is deeply characterized by fraudulent activities and their related corrupt practices. Fraudulent activities are responsible for instability in the economy resulting in a high mortality rate of business organizations and the consequent losses of revenues. Hence, the need for a Fraud Management Lifecycle practices/employed by business organizations. The management system if managed effectively and with well-balanced components is expected to significantly help an organization to prevent and reduce the losses associated with fraud and ensure organization performance
A study by Oluremi and Gbenga (2011) in their study of financial fraud its implication to SMEs survival postulated that for SMEs to thrive, and then it must be free from all forms of inducement and fraud. Another study by Ibidun and Ogundele (2011) also revealed that a fraud-free business environment is needed to assure organizational performance. In the same light, Ciano (2011) opined that bigger business organizations are mostly characterized by fraud and as such are advised to put a measure in place to tackle them. Despite the efforts of anti-corruption agencies in the country, Economic and financial crime commission (EFCC) and Independent corrupt practices and other related crimes (ICPC), there still exists a gap in a manner in which both financial fraud and any other fraudulent activities are been handled. This study, therefore, seeks to investigate how fraud management impacts organizational performance
1.2 Statement of Problem
In many business organizations, fraudulent activities have actually marred their performance and growth and this could be traced to the inability of the business organizations to monitor properly the dealings of its financial dealings and to a large extent those in saddled with the responsibility of financial records. For any organization to perform well, it must be free from any and every form of fraudulent and corrupt practices financially (Hotten, 1993). One of the major problems that have affected the performance of organizations is financial mismanagement. These financial fraudulent activities might be in the form of money laundry, forgery, nepotism, etc (Olayiwola, 2004). The manifestation of this fraudulent act is that the organization will result in poor competitive advantage and financial breakdown leading to unprofitability.
Another problem is the inability of organizations to employ competent financial analysts who can unearth the rot and set the tone for a fraud-free organization (Akpa, 2007). Furthermore, most of these fraud cases happen from the top offices making difficult to prevent, detect and control for the survival of business organizations. Cutting corners is a very prevalent issue characterized in the Nigerian business space as most times the business policies dished out by policymakers make it harder for businesses to survive.
It is light of this these challenges that this study sought to evaluate the impact of fraud management on organizational performance using fraud detection & prevention and periodic control/audit as the dimensions of fraud management as adopted from the works of Ojoide (2000)
1.3 Purpose of the Study
The main purpose of this study is to investigate the effect of fraud management and organizational performance. The following are the specific objectives of the study
- . To investigate the effect of fraud prevention & detection and organization performance.
- To investigate the effect of Periodic Control/Audit on organization performance.
1.4 Research Questions
- Does fraud Prevention & detection have any effect on the performance of the organization?
- Does fraud Periodic control & Audit impact on organization performance?
1.5 Research Hypotheses
The following null hypotheses shall guide the study
- Fraud Prevention & detection has no effect on organizational performance
- Fraud Periodic Control & Audit has no effect on organizational performance
1.6 Significance of the Study
In a time like this where financial cybercrimes are the other of the day, a study as this is could be very resourceful and useful to business owners and managers.
To managers, this study will unveil strategies to monitor fraudulent activities and also showcase to them the right tools to employ in the case of any fraud.
To financial institutions, this study will also bring them tested information on how to use technological equipment in guiding against any potential fraud cases
To scholars, this study will give them a good background to conduct future studies.
1.7 Scope of the Study
This scope of this study is at three levels;
Content scope: The content scopes of this study are Fraud management (Independent Variable) and organizational performance (Dependent Variable)
Geographical scope: This study is conducted in Nigeria
Unit of analysis: The unit of analysis of this study shall compromise of managers of selected deposit money banks
1.8 Limitations of the study
The limitations of the study look are the setbacks the researcher observed during his study. That notwithstanding, limitations will most assuredly motivate potential researchers and give them a cause to carry out further research on their own.
The construct of this study is limited to Nigeria. This was due to financial and logistical constraints and the data used where only primary data as obtained from a structured questionnaire designed by the researcher
Inadequacy of returned Research Instrument: This is one dilemma faced by researchers as most times the retuned research instruments are not enough to carry out the research and testing of the variable that are studied.
Information Inadequacy: This most likely to arise from the inaccessibility to get some information needed to carry out the work and this can be due to some organizational policies when it comes to information sharing.
Respondent’s Bias: This could also be a challenge as most respondents do not give real answers to the questions as they feel they should protect their organizations or some personal reasons.
Other limitations may include a wrong statistical tool for analysis, the time factor, and finance to bridge these limitations and still produce an empirically accepted work, the researcher shall employ the use of data cleaning and filling to make up for places where there are data inadequacy and also reduction in areas where the data are too much or excess.
1.9 Definition of terms
Fraud detection: This is a set of activities undertaken to prevent money or property from being obtained through false pretenses.
Fraud prevention: the act of stopping or preventing a fraudulent activity.
Fraud Management: This is the real-time screening of transaction activity across users, accounts, processes, and channels to identify internal and external fraud in an organization.
Organizational Survival: This provides a rational, research-based approach to creating a durable business strategy designed to meet the needs of today’s customers and position an organization to outperform while positively impacting society, the environment, etc
1.10 Organization of the Study
Chapter one is used to discuss the introduction, which covers the background to the study, statement of the problem, research purpose, research problems, and statement of hypothesis, significance, and scope of the study. The contextual definition of some terms used in the study was provided and the chapter ends with the organization of the study and references.
Chapter two, the contribution of different authorities will be reviewed under the following sub-heading, theoretical and conceptual framework, dimensions and measures to the independent and dependable variables.
Chapter three discussed the methodology adopted in the study, these include research design, population of sampling procedure, research instrument/administration, source(s) of data, the validity of instrument and data analysis technique.
Table of Content
CHAPTER ONE: INTRODUCTION
1.1 Background of the study 1
1.2 Statement of problems 5
1.3 Purpose of the study 7
1.4 Research questions 7
1.5 Research Hypotheses 7
1.6 Significant of Study 8
1.7 Scope of the Study 8
1.8 Limitation of the Study 9
1.9 Definition of Term 10
1.10 Organization of the Study 10
CHAPTER TWO: LITERATURE REVIEW
2.1Concept of Fraud Management 12
2.2 Fraud Prevention and Detection 21
2.3 Periodic Audit/Control 25
2.4 Concept of Organization Performance 28
2.5 Empirical Review 29
CHAPTER THREE: METHODOLOGY
3.1 Research Design 34
3.2 Population of the study 34
3.3 Sampling and Sample Size Determination 35
3.4 Nature/Source of Data 36
3.5 Method of Data 36
3.6 Validity and Reliability of the Study Instrument 37
3.7 Data Analysis Techniques and Procedure 39
3.8Operational Measure of Variables 40
CHAPTER FOUR: DATA ANALYSIS AND DISCUSSION OF FINDINGS
4.1 Description Analysis 42
4.2 Analysis of Research Question 31
4.3Discussion of Findings 51
CHAPTER FIVE: SUMMARY, RECOMMENDATION, AND CONCLUSION
5.1 Summary 54
5.2 Conclusion 55
5.3 Recommendation 55
Reference 56
Appendix 67
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