Fraud is actually a high probability event. Over the the last 20 years especially with similar cases like ENRON in 2001 and LEHMAN Brothers in 2008, traditional institutions - (eg. publicly held corporations or banks) have coped with this through governance boards and internal audit departments.
I think newer industries like Crypto, AI and Space are slower to adapt to these concepts as newer pioneers are setting up managements that are unaware of the fraudulent past, the corruptive nature of the ability to acquire money and be able to hide/ misappropriate it. Well, I could understand why, startups won’t spend more money for governance and reviews as it does not have a direct impact to the overall product or service and as they eventually get bigger—they fail to realize the need to review the control features that worked when they were still small...
I should put fraud risk to as high as 10% - could go higher if the internal controls are weak or non-existent. Like who checks SBF? or all of the funders? that is a great thing to start reviewing moving forward in my opinion. The cost of any scandal is too large that it will affect the EA community’s ability to deliver its objectives.
Hi Nathan,
Fraud is actually a high probability event. Over the the last 20 years especially with similar cases like ENRON in 2001 and LEHMAN Brothers in 2008, traditional institutions - (eg. publicly held corporations or banks) have coped with this through governance boards and internal audit departments.
I think newer industries like Crypto, AI and Space are slower to adapt to these concepts as newer pioneers are setting up managements that are unaware of the fraudulent past, the corruptive nature of the ability to acquire money and be able to hide/ misappropriate it. Well, I could understand why, startups won’t spend more money for governance and reviews as it does not have a direct impact to the overall product or service and as they eventually get bigger—they fail to realize the need to review the control features that worked when they were still small...
I should put fraud risk to as high as 10% - could go higher if the internal controls are weak or non-existent. Like who checks SBF? or all of the funders? that is a great thing to start reviewing moving forward in my opinion. The cost of any scandal is too large that it will affect the EA community’s ability to deliver its objectives.
All the best,
Miguel