John Sedgwick, special correspondent, looks at the balance between ethics and temptation.
In spite of strengthened regulations and greater investment by companies in control structures, cases of business fraud incorporating everything from theft to more complex management corruption are posing an increasing threat to ethics in the workplace.
The £3.6 billion loss reported at Societe Generale has highlighted financial fraud at the highest end of the scale, but business crime covers a vast array of issues and is becoming increasingly commonplace.
According to the biennial 2007 PricewaterhouseCoopers global economic crime survey only 17 per cent of companies questioned believed they would be victims of fraud, yet 48 per cent can expect to be hit by some sort of economic crime.
BDO Stoy Hayward's 2007 FraudTrack research shows an overall increase in reported fraud of 153 per cent since the first survey in 2003, from £411 million to £1.04 billion and analysts predict that with companies feeling the squeeze of an increasingly tough business climate in 2008 they are more likely to be tempted to stray to the wrong side of the law.
The Midlands did not perform particularly well in the latest FraudTrack research which showed the region to be engaging in business fraud to the tune of £320 million, amounting to 32 per cent of total fraud in the UK. Only London and the South East, the centre of the financial services industry, had a higher proportion at 34 per cent, or £340 million.
VAT fraud has seen the biggest growth in recent years, developing to incorporate crimes involving bogus anti-terrorist certificates, tax rebates, export clearance and even the crime of offering compensation to fraud victims. Carousel fraud where firms dodge VAT payments presents a substantial amount of the value of organised fraud and identity fraud also continues to be a big problem.
The Financial Services Authority which handles fraud within the financial services industry and works in tandem with the Serious Fraud Office, the police and the Serious Organised Crime Agency launched its first criminal prosecution for insider trading in January this year.
There are no exact figures on the cost of insider trading but it is estimated that almost a quarter of share trades around company announcements involve buyers acting on information. Distinguishing whether a buyer is simply acting legitimately on a broker's recommendation or acting on insider information that is not available to the wider market becomes the real problem.
There are numerous organisations working to reduce fraud and crimes in business by promoting good business ethics for individuals and companies.
The Securities & Investment Institute is a training, examining and membership organisation for the sector.
The organisation presently has over 30,000 individual members who benefit from the professional and social events that they provide and their presence is growing substantially in the West Midlands with 700 members affiliated to the Birmingham branch.
Along with a supplementary branch serving the East Midlands it runs a programme of continued professional development events which include series of seminars, lectures and master classes.
Integrity and ethics are often viewed as lofty, intangible ideals by many businesses, but SII has taken up the challenge to make these values real and relevant to those working in the industry.
The Institute has issued a code of conduct with the help of the Worshipful Company of International Bankers which consists of seven short, practical principles referring to the duties owed to a particular stakeholder. To date 39 firms, including a number of well known global banks and stockbrokers, have endorsed this code.
It stated: "Formulating a structured philosophy of business ethics can have varied benefits for a company.
"Setting out an organisation's ethical values, standards and commitments to stakeholders will underpin the way that it does business and confirm leadership commitment to these values.
"Detailing the main ethical issues faced by the organisation or sector as well as aspects of the ethics policy such as a code of ethics, a speak up policy, a bullying and harassment policy, a gifts and hospitality policy, an environment policy is also of great importance."
In the introduction to the SII's Integrity at Work in Financial Services, Lord George, former Governor of the Bank of England, says: "There needs to be real appreciation that trust matters. If you don't have it people won't use your services. It's very simple. If you want to prosper in the long term, you must treat your customers fairly. Do as you would be done by is a compelling principle for human behaviour in general."
The SII's integrity and ethics committee, composed of senior industry practitioners and leading lay members, has also created a series of relevant case studies, based on personal experience.
These scenarios are used to explore and explain a variety of ethical dilemmas and are published in the SII members' magazine, Securities & Investment Review.
Optimum solutions to such business dilemmas are seldom wholly black or white.