A Crisis Management Plan for Ethical Misconduct and Financial Fraud

Abstract

Man made crises caused by ethical misconduct and financial fraud can be the undoing an organization. Regaining employee and stakeholder trust once such a crisis has occurred can be very difficult. However, having a plan in place that specifically outlines steps for working through an ethics and fraud crisis can improve the chances of rebounding as well as create an organizational learning opportunity. For this reason it is imperative that organizations create a crisis management plan specifically for ethical misconduct and financial fraud. In an ideal world, creation of such a plan will include pre-emptive measures and safeguards to head off such a disaster. However, a plan must take into account that prevention does not always work. The responsibility for crisis management in an organization ultimately lies with top leadership. But if top leadership is the cause, crisis management must emerge from somewhere else in the organization. This paper will address the execution of such a plan when preventive measures fail and top leadership is involved in ethical misconduct. It will also look at some best practices for creating effective, sustainable crisis management plans for instances of ethical misconduct and financial fraud within an organization.

Keywords: fraud, ethical misconduct, crisis management

JEL Classification: M41