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Fraud Exprosed Whot you Dont Could Cost your company millions - Joseph W.

Joseph W. Fraud Exprosed Whot you Dont Could Cost your company millions - Wiley Publishing, 2003. - 289 p.
ISBN: 0-471-27475-5
Download (direct link): fraudexposedwhatyoudont2003.pdf
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Another level of abstraction is represented by non-zero-sum games, where the sum of the payoffs need not be zero or even constant. Again, such games may be even more representative of reality, since in many business situations there can be more than one winner, with various degrees of success. Such
FRAUD EXPOSED
games may also have noncompetitive aspects that can contribute to the mutual advantage or disadvantage of all players. They cite the example of the advertising strategies of competing companies that can impact not only the market share of the individual company but also the size of the overall market. Because there is the possibility of mutual gain, non-zero-sum games can be further divided into noncooperative and cooperative games, based on the degree of preplay communication that is allowed by the situation. Labor-management negotiations and international trade negotiations can be thought of as examples of cooperative games, especially since players may have the ability to form coalitions to improve their positions.
Finally, Hillier and Lieberman cite infinite games, where players have an infinite number of strategies available to them. They describe such situations as those in which the players have a continuous decision variable. Examples of such games would be decisions as to how many resources to allocate to a given task or objective, or when to execute a given action or activity. They note, however, that the calculations necessary to try to address such games are “relatively complex.”52
Adam M. Brandenburger of the Harvard Business School and Barry J. Nalebuff of the Yale School of Management have postulated, in their book Co-opetition, a theory of business management based on game theory. They see most business scenarios not as either war or peace, but as a mixture of competition and cooperation. Citing the work of von Neumann, Morgenstern, Nash, and others, they note that the concept of game theory had at least part of its roots in World War II, when British naval and air forces were attempting to improve their strategies for countering the offensive being waged by the German U-boat fleet. Addressing such issues helped give birth to the concept of game theory and improved the British success rates markedly. Following the publication of Theory of Games and Economic Behavior, by John von Neumann and economist Oscar Morgenstern in 1944, game theory came to be employed in fields as varied as computer science, economics, military strategy, law, and even evolutionary biology. Brandenburger and Nalebuff cite the following characteristics of game theory as central to its utility:53
• Game theory focuses directly on the most pressing issue of all: finding the right strategy and making the right decision
• Game theory is particularly effective when there are many interdependent factors and no decision can be made in isolation from a host of other decisions
• Game theory is an especially valuable tool to share with others in your organization
• Game theory is an approach you can expand and build on
Is game theory too esoteric for our purposes? It appears to be a matter of mutual self-discovery. Those in the forensic profession need to become more conversant
WHAT'S NEW?
with game theory and what it can and cannot do, and those who practice in the game theory field need to become aware of the potential of their profession to organizations concerned with occupational fraud. Brandenburger and Nalebuff put this situation as follows:
Many businesspeople have heard of game theory and suspect that it’s a potentially powerful tool. But all the mathematics can be baffling At the same time,
game theorists are often unfamiliar with business practice.... Our experience in teaching, research, and consulting suggest that communication between the worlds of game theory and business practice is both possible and valuable.54
Game theory might be a sizable chunk for the average organization to bite off, although I suspect many of our organizational parents use it routinely in business operations. Collectively, however, it is certainly worthy of further exploration. We know (or at least we think we know) that fraud is probably an approximately $600 billion annual problem in the United States alone. Such numbers make even the largest auction in history look small. The scenario is perfect if we think of ourselves in the classic military/game model: I and an opponent are competing for the same prize; we both have strategies to achieve our objectives; we have some degree of knowledge of what the other strategy is; and we want to win. The applicability, I believe, is obvious.
Forensic Professionals as Organizational Pathologists
Goldstein’s concept of the police, or in our case the forensic professional, as pathologist is also interesting. In many important ways, it is likely that the cop on the beat has a better understanding of what is going on in town than does the mayor. The cop, particularly in the community policing models discussed, has much more daily interaction with the citizens. Forensic professionals, likewise, may also possess important information and insights that are unavailable to the CEO. Even though hamstrung by poor information systems and inadequate staffing, these professionals probably have a better sense of the state of organizational disease and dysfunction. How can these data be made available and usable? How can they be generalized away from the anecdotal toward the abstract and, thus, be useful in informing and shaping organizational decisions and processes? How can they be presented to avoid the common filters that operate to prevent bad news from rising? In the interest of protecting the messenger, how can it be done without getting the messenger shot?
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