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Dorothy Flynn, CEO, was featured in an article entitled “Why Funds’ Anti-Fraud Vigilance Should Include Vendors,” published in the April 17, 2008 issue of Ignites. She discussed the importance of taking a principles-based risk management approach to managing service providers and to managing investor data.

[According to] Dorothy Flynn of The Keane Organization, a compliance consulting firm, “One of the problems is that when it comes to service providers, you don’t know whether they are working out of their garage, or whether they are a legitimate organization.”  Often companies are reluctant to do the type of on-site due-diligence exams that are necessary. That’s especially true in times like these, when executives are pressing companies to cut costs. However, the cost of ignoring risk is much greater.

Another challenge shops face is determining how to best measure vendor risk. “If the example of how we are managing risk comes from [Sarbanes-Oxley] controls, I don’t think that’s going to get us there,” Flynn says. Rules-based risk controls work fine for vetting clients who are opening new accounts, for example, but they do not address whether companies truly know existing clients. A so-called principles-based approach will help companies and their service providers both apply new rules and look for loopholes to close, she says.

Keane’s Investor Data Quality program helps mutual funds and corporations take a principles-based approach with a proactive analysis that identifies “red flags” for fraud, compliance and asset risk. By mitigating these issues, any organization can reduce unnecessary risk and cost.

For more information on ICRS services, please contact Mark Sweatman at (610) 232-0745 or msweatman@keaneco.com.