A New Weapon for Combating Fraud: Gender Equality

Fraud is a very real consideration for businesses large and small across the UK, but new research shows gender equality in the boardroom might help fight its spread.

There are a seemingly limitless number of potential threats which prey on the smallest oversight or hint of corporate complacency, resulting in losses for the UK economy of over £85bn in the last year alone.

Fraud is in a constant state of evolution; for every scam identified, a new one is born which exploits a new weakness entirely.

New Research Shows Gender Equality Helps Tackle Fraud

Commonly we think of fraud as an act committed by an external entity, yet insider fraud poses one of the greatest threats to UK businesses today. Recent research by three professors from Hong Kong and Chinese business schools has uncovered an unlikely insider fraud prevention technique: gender equality.

The research examined the importance of a female presence on the boards of leading Chinese firms and the impact this had on the level of securities fraud within them. The results indicated that an increased number of women in high level positions experienced a reduced rate of securities fraud.

Male Dominated Boards More Likely to Transgress

The study looked closely at over 1,400 alleged cases of securities fraud in Far Eastern businesses over a ten-year period. The evidence strongly supported the premise that boards of directors dominated by men are more likely to be involved in fraudulent practice.

The professors focused on the integral role gender diversity has to play in creating a behavioural balance. They argued that, rather than being more honest than men, women simply lean towards more risk averse decisions in financial matters.

This is in stark contrast to the natural tendencies of men, who are prone to risky financial decisions without due consideration for their shareholders’ or stakeholders’ interests.

The Benefits of Diversity

Embracing gender equality at the top of the business hierarchy could help to reduce the risk of insider fraud. It is estimated that corporations lose up to five percent of their revenue as a result of fraud every year.

However, this simple measure could help to prevent fraud in the following ways:

• Increasing the number of women in the workplace broadens a business’ skill set
• A more diverse workforce results in a greater divergence of opinion, ultimately improving decision making
• More varied opinions improve internal discussions and increase the scrutiny of decisions

If you would like to share your views about the role of gender diversity in reducing the risk of fraud, I would love to hear from you. Please leave your thoughts in the comments section below.

Photo (cc) Mark Mathosian on Flickr.