PharmaWell Purchase Card Risk Management Case

PharmaWell Purchase Card Risk Management Case

Thomas Guyden
Copyright: © 2024 |Pages: 12
DOI: 10.4018/979-8-3693-3226-9.ch009
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Abstract

PharmaWell, a prominent pharmaceutical company known for its commitment to ethics and compliance, recently discovered that several mid-level managers within the organization have been misusing their corporate credit cards for unauthorized personal expenditures for more than five years. This ethical breach has raised questions about the company's ethical culture and oversight mechanisms related to financial risk management practices. This consultant-based solution for PharmaWell involves a comprehensive and integrated approach to address the ethical and physical breach of mid-level managers misusing corporate credit cards. Leveraging the Six Sigma DMAIC problem-solving model, Kotter's 8-Step Change Model, and the COSO Enterprise Risk Management Framework, the ethical solution begins by clearly defining the problem and establishing a sense of urgency for change. Concurrently, the ethical solution addresses transparency, accountability, and continuous improvement in hiring practices by implementing standardized processes, diverse hiring panels, and metrics for diversity.
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Introduction

PharmaWell, a renowned pharmaceutical company, is confronting a critical ethical breach as numerous mid-level managers have been discovered misusing corporate credit cards for unauthorized personal expenditures over a period exceeding five years. This misconduct has financial repercussions and raises significant questions about the company’s ethical culture and oversight mechanisms related to financial risk management practices. The breach reflects potential weaknesses in existing organizational management structures, emphasizing the need to examine PharmaWell’s risk management practices comprehensively. The impact extends beyond financial losses, encompassing reputational risks and cultural implications, thus necessitating a holistic response. Root causes may include inadequate oversight mechanisms, a potential lack of a robust ethical culture, and insufficient training for mid-level managers. Internal and external stakeholders are directly affected, with legal and regulatory consequences looming. This situation demands a thorough analysis of PharmaWell’s organizational culture, existing risk management practices, and readiness for change. Addressing this ethical breach requires rectifying the immediate issue, implementing preventive measures, and rebuilding trust within the organization and the industry. PharmaWell’s purchase card risk management case study highlights the importance of a robust ethical culture and effective financial risk management practices in organizations. It presents an opportunity to apply advanced knowledge in organizational management, change management theory, enterprise risk management (ERM), and problem-solving models to propose comprehensive solutions for preventing the recurrence of such ethical breaches.

Problem Statement

The intentional misuse of corporate credit cards by management or employees, also known as asset misappropriation, constitutes occupational fraud and threatens any company’s profitability and long-term success (Onesti & Palumbo, 2023). Businesses in the United States lose $1.35 trillion in revenue each year to employee fraud and abuse (ACFE, 2022; IMF, 2023). In 2022, the pharmaceutical industry lost $38.7 billion of its $774 billion total annual revenue to the same cause (ACFE, 2022; Mikulic, 2023). According to Wetherell and Pendell (2023), only four in 10 employees report ethical misconduct, indicating that reputational damage, legal repercussions, and the loss of shareholder trust can result from ethical lapses in financial practices. As a general business problem, this form of occupational fraud is a pervasive issue that jeopardizes the financial health of organizations across various sectors, necessitating urgent attention and strategic intervention to mitigate the impact on corporate resources. More specifically, there is an immediate need to curb mid-level managers’ unauthorized use of corporate credit cards, implement adequate controls, and establish a comprehensive framework to prevent future asset misappropriation. In the present case study, these steps are crucial for safeguarding PharmaWell’s financial resources and upholding ethical standards within the organization.

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