• Zach Clark, CPA, CFE

What the celebrity admissions scandal means for your organization - and what you can do.

With the unfolding drama of the celebrity college admissions scandal it is almost laughably unbelievable to see the lengths that these celebrity parents would stoop to in order to get their children into the colleges that they desired. Photo-shopped faces, fabricated sports careers, and a tangled web of corruption and fraud between college employees, third party testing companies, and other parties should serve as a reminder that the risk of fraud exists in places that you might not expect.

In his book, The Black Swan: The Impact of the Highly Improbable, Nassim Taleb describes the powerful effects of outlier events that, due to their rare and unpredictable nature, are extremely hard to predict. While the celebrity admissions scandal may not rise to the level of the extreme events discussed in Taleb's book, I think that for top administrators at the schools in question these recent scandals would probably be described as powerful, rare, and unpredictable - in other words: Black Swan events.

In Taleb's book he forwards the idea that due to the extremely difficult (impossible?) task of predicting Black Swan events, one should instead build robust systems that protect from the deleterious effects of these events. I believe that in regard to this current scandal, a similar lesson emerges: all organizational leaders, and specifically school administrators in this instance, would be well advised to go above and beyond to protect their organizations from the unexpected.

Per the initial reports, the scandal was eventually uncovered through a tip provided while investigators were working a different case. While this again underscores the fact that tips are far and away the most common way that fraud is detected, I'm left wondering how much sooner this tangled web of corruption would have been uncovered if the colleges had been informed by someone on the inside of this massive fraud, instead of having investigators stumble upon the crime.

While most of us operate under the assumption that are organizations are at no great risk of fraud, corruption, sexual harassment, serious workplace safety issues, or other significant business risks, I believe that all organizational leaders would be wise to heed Taleb's advice and prepare as best as possible for the Black Swan by implementing an anonymous tip reporting system at their organization, and I am by no means alone in this view. Whistle-blowing mechanisms are a universally recommended best practice backed by copious amounts of independent research including 20+ years of research by the largest anti-fraud organization in the world.

If you're an organizational leader that wants to go above and beyond in the protection of your organization, you need an anonymous tip reporting system. While there is no guarantee that an anonymous tip reporting system would have stopped the college admissions scandal, all of the evidence suggests that there is a high chance that it could have. Don't leave your organization defenseless, open your ears to the Black Swan of the absurd - as the old adage goes: better safe than sorry.