Tuesday, 28 January 2014

Fighting failure with transparency



A review of how transparency in 2014 may help address some of the causes of significant failure and incidents of fraud in 2013.

In the Anticipate Change community we dig around in emerging issues relevant to those adopting business intelligence. This post is a summary of some of the lessons learned in 2013, which we hope leads to better decision making in 2014. The focus is on failures and fraud that we noticed around the world, emphasising the need for transparency about those individuals and organisations holding power over the public.


Failure: Supply chain disasters

An article in the Telegraph notes that you'd likely to want to know "where your product has been made or grown" going into 2014. Indeed, due to the increasingly complex realities of globalisation and shown out in the horsemeat scandal, we should be reasonably concerned about what might make its way into our food supply.

McDonalds leapt at the chance to appeal to worried consumers by sharing a child-friendly mobile app that reveals supply chain data in a 'cartoonish' form. Certainly a step in the right direction, but is this transparency?

The Guardian points out that suppliers have become reluctant "to 'waste time' completing check-lists and audits", but these failures and lack of transparency can pose serious consequences:
"Lack of visibility and a lack of direct influence over suppliers further down the supply chain can lead to distinct problems: work can be sub-contracted or even contracted directly to suppliers with poor health and safety standards, dismal labour rights records or detrimental environmental practices."
The Telegraph informs us that the shift in consumer priorities is being led by Provenance - "a new type of search engine attempting to chronicle ... where a product is made, who the manufacturer is and what the product is made from." The article continues:
"...the site works in collaboration with everyone from small-batch producers to large multinationals in the hope that, by simply taking the mystery out of supply chains and worldwide commerce, the site will help shoppers make better choices. As well as gently forcing companies to improve their environmental and social impact."

Fraud: Financial abuse

The Washington Times reported on a recent audit of the Internal Revenue Service (IRS) that revealed payments to tax-cheat vendors that reached "hundreds of millions of dollars a year". J. Russell George, Treasury Inspector General for Tax Administration said:
“When the IRS conducts business with vendors that do not comply with Federal tax laws, it conveys a contradictory message in relation to its mission to ensure compliance with the tax laws.” 
David Pidsley, the data strategist at Cause Analytics says that a combination of spend analysis,
data mining and business intelligence could reduce the chance of such vendor issues arising in the UK's Central Government. He suggests that midsized organisations:
"...integrate data silos so that purchasing and procurement teams can filter suppliers by tax status to reduce risk and prevent fraud. A clear example of where "joined up thinking" can make for better decision making." (18 Dec 2013)
The Guardian reveals that between 2011 and early 2013 the UK public sector lost £20bn due to fraud. According to the Centre for Economics and Business Research (Cebr), cited in the article, predictive analytics, data mining and advanced data visualisation are the best way to accurately prevent fraud. The discussion at the Guardian, however, hones in on the value of big data in tackling fraud when the costs of specialist knowledge and complex infrastructure are so high.

Fraud: Charity gone awry

Some of the largest charitable organisations are facing issues with fraud.  Consider the Vatican, the scandal-ridden institution has long been scrutinised, but Pope Francis is undertaking efforts to "overhaul the Holy See's finances after years of scandals." The WSJ article refers to a 120-page report by Moneyval, a committee of financial experts backed by the 47-nation Council of Europe, which criticised the Vatican for "regulatory oversight of its scandal-ridden bank" with its "opaque" financial dealings, while encouraging strengthened measures aimed at preventing "money-laundering and terrorist financing." Expect a progress update by the end of 2015.

UK mega-charity, Comic Relief, has recently been scrutinised for investments in tobacco, alcohol and arms firms, in that they may conflict with its commitments to fight tuberculosis, to reduce alcohol misuse and harm, as well as efforts to help people affected by conflict. CivilSociety.co.uk points out that the negative media coverage on Comic Relief highlights the challenges faced by charities to invest ethically and meet the public's expectations that investments should support the charity's objectives.

Another pressing issue facing charities involve public perceptions of the salaries earned by charity executives. The BBC cites the Daily Telegraph's finding that "30 staff at 14 leading UK foreign aid charities were paid £100,000 or more last year. Charity Commission chairman William Shawcross encourages us to question if such high salaries are "fair" to donors and taxpayers.

High salaries paid to those CEOs who fail to address fraud may bring the wrath of donors and the public, but for those who create social impact and deliver results in the public interest, why should they be paid any less? Dame Barbara Stocking, a former chief executive of Oxfam, told BBC Radio 4's World At One:
"These are very demanding jobs, very long hours. The range of the business you cover, from a retail network in the UK to international situations, are hugely complex." 
The fact remains, we live in a world where attracting, retaining, and motivating the best talent to undertake results-driven positions that create success often calls for higher pay. Outrage about unethical practices is one thing, but when leaders are transparent and trusted, what's the problem?

A critical aspect of maintaining trust is ensuring that the charity's investments are grounded in their values. Founder of the True and Fair Campaign, Gina Miller, believes that investments made by charities should not conflict with the causes they support, nor should such large amounts be "wasted on inefficiencies, fees, overstaffed marketing and operations departments and huge salaries". Miller bemoans the investments made by charities like Comic Relief, whose holdings she thinks should be published online, so that all stakeholders can see exactly where their money is invested.

Delivering on transparency

2013 continued to see shared transparency standards being strongly advocated in international development budgets and foreign assistance donations. The Aid Transparency Index (ATI) report is an assessment of the world’s major donors which David Hall-Matthews, Director of Publish What You Fund, describes further:
“Open data and transparency are becoming fashionable watch words, but we’re checking if donors are really delivering, looking beyond high-level commitments and long-held reputations. The ATI ranking shows that no matter how many international promises are made, no matter how many speeches there are around openness, a startling amount of organisations are still not delivering on their aid transparency goals. We will continue to encourage organisations to release more data – but more is not enough. We also want to make sure that the information is useful.”
For transparency to be useful - storytelling and data visualisation can be combined to reveal the true cause at the heart of a social problem, as nonprofit strategist Daniel Melbye explains on his blog post on the subject. In conclusion, he suggests that we need beautiful, truthful stories that reveal the progress and achievements of charitable initiatives using data, particularly ones that focus in on individual case studies.

While failure and fraud does not tell a pretty story, these issues will leak sooner or later as Tracy Kitten, the Fraud Blogger, points out:
"Organisations that proactively address missteps or security breaches or any other potentially reputation-damaging event are more respected by the public."
What better way to begin addressing the fraud and failure, in any sector, than by taking steps toward transparency?


Posted by +Dan Durrant

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