Financial Risk Manager

A well written article by Athar Hussain Zaidi FCA and Saima Batool

Investigating for evaluating misconduct or violations of rules and regulations is a necessary, but unpleasant, job for most human resource professionals, fraud examiners and law experts. Investigations should be conducted whenever there are serious complaints about workplace problems, including rule or policy violations (such as violating the safety or harassment policy), misconduct (such as falsifying records or reports), or criminal acts (such as stealing). In addition, at times the professionally managed organizations should be prepared to investigate lesser problems, even without a formal complaint, like rumors or suspicions of rule violations or wrongdoing.

The consequences of investigations that are not fair or thorough can be very serious and extensive. If your termination or disciplinary decisions are based on flawed investigations, they may trigger employee lawsuits for defamation, discrimination, harassment, or wrongful termination. In fact, even the accused wrongdoer may sue when an investigation is handled poorly or the decision appears unfounded and of no locus standi. Significantly, courts tend to punish employers that do not conduct thorough nvestigations respecting the legal procedure laid down in this behalf. In addition, employee morale may suffer if employment decisions appear unfair or arbitrary because the process was not thorough or objective.

So in order to help prevent these problems and ensure an effective investigation, the following elements are suggested to be part of your investigative process:

1. THE INVESTIGATOR SHOULD BE A TRAINED SENIOR PROFESSIONAL AND OBJECTIVE IN HIS APPROACH

The qualifications and demeanor of the person conducting the investigation will influence the perception of fairness. Ideally, the person should have special training and experience in human relations, employment law, conflict resolution and fraud examinations.

In developed countries such as USA many employers rely on their internal human resource professionals or senior security officers in this role. However, an outside investigator may be appropriate if the issues are particularly sensitive or legally complex. (Note that where an outside investigator is used, certain disclosure requirements have to be complied with under the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003 of USA) In addition, some states in America, such as California, require that thirdparty investigators be licensed by the state. Unfortunately, in developing countries, the enquiry officer is usually appointed from amongst the staff who may not have the ability and skill to do the job. The only requirement in the industrial labour laws of Pakistan is that the enquiry officer should not be of the rank below the person who is being investigated.

2. WRITTEN PROCEDURES

Specific procedures should be established which must be followed by supervisors and managers conducting investigations. The written procedures should address each step of the process and provide guidelines for fact finding (including choosing and interviewing witnesses), proper documentation of the investigation steps and the facts revealed, protection of confidentiality,and communication of results.

3. A TIMELY PROCESS

Investigations should be completed as quickly as possible after a complaint is filed, the misconduct is observed, or the alleged incident occurs. Normally, no more than a few days should elapse between each step in the process; ideally, the investigation should be completed within five to ten days. Of course,investigations that involve complicated issues like harassment or theft or stealing company property and information may take longer.

4. CAREFUL FACT-FINDING

The investigator should begin by gathering as many facts as possible about the problem, either by interviewing the complaining party, or if no one made a complaint, by interviewing people who may be involved or who may have witnessed the problem.

As a general rule, the investigator should talk to any person who may have information that would either prove or disprove that the alleged conduct occurred. To obtain as much detail as possible, the investigator should ask probing and open-ended questions that do not suggest the answer. Interviews should focus on the specific facts of what happened (like when, where, and who was involved) and preserve confidentiality by addressing only the details that the particular person would know. In addition, the tone of each interview should be professional, and everyone interviewed should be reminded that the organization will not retaliate, or tolerate retaliation, against anyone for participating in the investigation.

5. DOCUMENTED RESULTS

All steps in the process should be recorded and documented in writing. Written records, properly compiled, aid everyone»s memory and can be invaluable in demonstrating,to employees and, if necessary, to a court, the fairness of the investigation and ultimate decision. Since these records may be used in legal proceedings, the information recorded should be limited to facts disclosed and behavior observed and should not include any speculation about what happened.

6. FINAL DECISION AND COMMUNICATION

Once the investigation is complete, management should evaluate the evidence and make a decision. Although most managers and human resource professionals worry about making the ÒperfectÓ decision, neither employees nor the courts expect legal perfection. Rather,they expect a rational decision based on a thorough investigation.

In fact, courts generally do not second-guess employer actions, even when later proven wrong, if management acted fairly and in good faith. Therefore, you do not have to meet a strict rule of evidence Òbeyond a reasonable doubtÓ, as for a criminal offense, in order to make a proper employment decision. As a last step, all appropriate parties should be informed of the decision. This communication can be used as an opportunity to underscore the fairness of the process. However, to prevent defamation claims, you should be careful to limit dissemination of the information to those who have a legitimate need to know.