A recent report by the global audit firm KPMG has highlighted serious “operational irregularities” within Norway’s state-run lottery operator Norsk Tipping. The audit firm, on behalf of Norsk Tipping’s Board of Directors, has analysed the root cause behind the errors in lottery winnings published earlier this year. The operator’s latest press release confirms that the board has acknowledged the flaws within the system and is following up on KPMG’s recommendations.
The KPMG Audit Reveals the Root Cause Behind Serious Errors in Norsk Tipping’s Lottery Operations: A Brief Overview of the Story
- KPMG’s report claims that Norsk Tipping was not fully aware of the inherent risks posed by the technical errors. The lack of technological proficiency and understanding of complexities has led to operational irregularities in lottery operations.
- The report mentions that the high pace of launching new products and services has come at the expense of reliability and quality assurance of Norsk Tipping and its external IT deliveries.
- Norsk Tipping has confirmed acting on KPMG’s recommendations. Out of the 25 measures listed by the audit firm, the operator is working to implement 22, while the rest will be addressed soon, according to Interim CEO Vegar Strand.
Lack of Technical Risk Awareness and Fast-paced Product Launch Behind Operational Shortcomings, Reveals KPMG Report
Norway’s state-owned lottery operator, Norsk Tipping, in a press release on December 5, has announced that global audit firm KPMG has submitted its investigation report into the operational irregularities flagged earlier this year. On June 27, Norsk Tipping published incorrect prize amounts after the Eurojackpot draw. Winners were notified of significantly higher prizes due to a technical error, although Norsk Tipping paid the correct amount.
This was a frustrating moment for players, as online casinos in Norway are generally known for offering a rewarding experience. Consumers were disappointed after learning that they would receive lower prizes. Former CEO Tonje Sagstuen had addressed the situation in a press briefing. She claimed that an error in the code that converts euro cents to Norwegian kroner in the gaming system resulted in the inflated winning amounts.
Sagstuen said:
I am terribly sorry that we have disappointed so many and understand very well that people are angry with us. I have received many messages from people who had managed to make plans for vacations, buy an apartment or renovate before they realised that the amount was wrong. To them I can only say: I’m sorry! But I understand that it is a meagre consolation.
The KPMG report observed that Norsk Tipping “has not been sufficiently aware of the inherent high risk of critical technical errors.” It attributed the fiasco to two significant factors:
- Deficiencies in technological professional management
- Lack of understanding of technical risks and complexities
The audit report noted that the fast pace of launching new products and services over the years had come at the expense of Norsk Tipping’s quality assurance of internal operational integrity and external IT deliveries. It highlighted a clear lack of leadership and division of responsibilities, as well as weak follow-up on suppliers.
Earlier this year, Norsk Tipping’s Board of Directors hired KPMG to investigate the Eurojackpot bug. At the same time, the operator had hired the accounting firm PwC to evaluate the internal controls for three of its largest lottery products: Lotto, Vikinglotto and Eurojackpot. The company published both the KPMG and PwC reports on October 3.
Norsk Tipping is in the Process of implementing 22 out of 25 of KPMG’s Proposed Measures
Norsk Tipping’s acting CEO, Vegar Strand, noted that the KPMG report has hit them hard. Officials are now working to implement PwC’s and KPMG’s recommendations, several of which were overlapping. Of the 25 measures proposed by KPMG, Norsk Tipping has begun implementing 22 of them.
Strand stated:
There is no doubt that the report hits us hard as a company. We are now working purposefully to put the problems behind us, and we are on the right track. Of the 25 measures that KPMG has proposed, we are in the process of implementing 22. It will be demanding for the entire organisation, but it is absolutely necessary to strengthen quality and rebuild trust.
Some of the measures that Norsk Tipping is presently working on include:
- Conducting a thorough review of the organisational model and culture.
- Specifying clearer requirements and expectations for managerial positions.
- Establishing better systematics for developers and testers, mandatory guidelines for development, testing and operation, and compliance mechanisms.
- Creating 10 full-time positions dedicated to quality assurance.
- Implementing a new system for supplier management, with closer follow-up and stricter requirements.
- Strengthening the top management and increasing technical expertise.
Strand is confident that Norsk Tipping is well-equipped to achieve the goals. He pointed out that the company did not waste any time in implementing KPMG’s suggestions and emphasised the importance of quality assurance in regaining the customer’s trust.
Strand continued:
We have not waited for the final report to initiate measures, and no one in our company is in doubt that the work has the highest priority. We must be of high quality and avoid mistakes in order to earn the trust of our customers. We are well underway with the job but still have a lot left.
Norway is one of the last Nordic nations to retain state control over gambling operations. Although there have been calls for establishing a regulated framework from several political factions, the gambling monopoly is resilient. However, recent controversies, such as Norsk Rikstoto’s loss limit violations and Norsk Tipping’s lottery payout fiasco, have prompted the government to strengthen oversight.