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Purchase Card Risk Management Case Study

Purchase Card Risk Management Case Study

Alphons A. Iacobelli (Marymount University, USA)
Copyright: © 2024 |Pages: 16
DOI: 10.4018/979-8-3693-3555-0.ch015
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Abstract

This case study examines the hypothetical company ParmaWell, a prominent pharmaceutical company known for its commitment to ethics and compliance. Although the case study narrates a fictitious pharmaceutical company, the organizational ethical challenges may be delineated in most public and private sector organizational settings. This case study examines the ethical culture and governance mechanisms related to financial risk management practices and the potential for organizational contagion. The case study provides detailed recommendations relative to advanced knowledge in organizational management, enterprise risk management (ERM), problem-solving models, and innovative solutions to address a problem of practice that may apply to many organizational settings.
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Purchase Card Risk Management Case

Situational Summary

PharmaWell is a prominent pharmaceutical company located in Auburn Hills, Michigan. Although known for its commitment to ethics and compliance, the company has recently discovered a disconcerting trend. Several mid-level managers within the organization have been misusing corporate credit cards for unauthorized personal expenditures for more than five years. This ethical breach raises questions about the company’s ethical culture and oversight mechanisms related to financial risk management practices. As a consultant of Acme Enterprises, the following advisory report has been prepared to apply advanced knowledge in organizational management, change management theory, Enterprise Risk Management (ERM), and problem-solving models to propose comprehensive, innovative solutions to rectify the problem of practice and prevent its recurrence.

Problem Statement

In June 2020, Novartis AG, a competitor to PharmaWell, settled $345 million in criminal and regulatory penalties to resolve violations for the misuse of company funds (DOJ, 2020). Alcon Pte Ltd similarly settled a $112 million with the U.S. Securities and Exchange Commission (SEC) in a related matter (DOJ, 2020). Pharmaceutical companies represent society's highest expected integrity, given their direct link to the population’s health and well-being (Wrage, 2020). The above-referenced criminal and regulatory settlements with the Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and the U.S. Attorney of the Southern District of New York represent highly publicized settlements addressing financial misconduct in four countries, including the United States, Greece, South Korea, and Vietnam. Although the consequences of the malevolent organizational behavior were settled without further prosecution, the significance of the underlying organizational challenges, if unresolved, risk internal and external stakeholder interests in addition to the credibility of the companies and perhaps the broader pharmaceutical industry. PharmaWell’s recently discovered ethical breach raises parallel concerns regarding the company’s ethical culture and oversight mechanisms relative to financial risk management practices requiring a pernicious response from the company’s leadership team.

Statement of Significance

Pharmaceutical research, development, and the services provided for the general well-being of society cannot be overstated (Campos et al., 2019). The pharmaceutical industry is considered one of the world’s most research-intensive industries, providing a continuous stream of products that save lives and increase the quality of life for individuals who rely on their products (Scherer, 2000). The risk of epistemic corruption to a company within the pharmaceutical industry may not only be reflective of the company but also be perceived as a contagion to the industry (Sismondo, 2021). Separately, the effect within the organization may be reflective of the ethical climate of the organization and its code of ethics, thereby influencing ethical decision-making (Payne et al., 2019; Timofeyev, 2015). Buncher and Tsay (2019) posit that approximately 50% of the U.S. population utilizes prescription pharmaceutical products. One in six individuals utilize three or more prescribed drugs, including half of the U.S. population age 65 or older (Buncher & Tsay, 2019). This profound reach extends globally with more offshoring of resources associated with the pharmaceutical industry (Buncher & Tsay, 2019). The significance and importance of the industry, although intuitive to the consumer, has also proven vulnerable to ethical compromises, as evidenced by noteworthy deferred prosecution agreements and the recent discovery that PharmaWell. In this case study, inductive reasoning of the causal factors associated with the misuse of corporate credit cards for unauthorized personal expenditures for over five years requires in-depth analysis and recommendations for remediation, beginning with assessing the impact on the employees and the organization.

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