Fraud can happen in any organisation, in many forms: financial fraud, bribery and kickbacks, payroll fraud and more. Ensure you have an effective approach to mitigating corporate fraud risk through prevention, detection and response.
Corporate fraud can cause financial and reputation damage as well as legal fees and fines. In fact, a typical organisation loses 5 percent of its revenue to fraud each year. Strong internal controls and a culture of ethics and integrity are key elements to help detect and prevent fraud.
Enforcement actions for bribery, fraud and corruption are at an all-time high. Fraud is hard to detect and often causes more than just financial damage. Despite this, many organizations do not have a formal program in place to address fraud. It’s easier and less expensive to implement prevention and detection techniques than to recover losses once they’ve occurred.
Your risk and compliance programme should ensure employees fully understand what constitutes fraud and have the tools to report it when it occurs. Your employees are your first line of defense, and are often aware of unethical business practices and corporate corruption. A fully integrated, risk-based system that includes policies, training, open lines of communication and third party risk management can help your organisation mitigate the risk of fraud.
A system that ensures your employees read and sign your corporate fraud policy.
Annual training that provides employees with a deeper level of understanding of corporate fraud and appropriate ethical behaviour.
Multiple methods for employees, customers and vendors to report fraud, including a whistleblower hotline.
A way to monitor your third parties on a daily basis, and a proactive plan to deal with reports of fraud.
Ongoing reminders to keep fraud prevention top of mind, including posters with your hotline number.
Appropriate internal controls such as segregation of employee duties and documentation checks, and annual audits to ensure these controls are maintained.
A positive workplace culture with open lines of communication with management.
A methodology in place for responding to and investigating potential instances of fraud.
Maintain and communicate strong corporate fraud policies and ensure all employees attest to these policies with a policy management system. Follow up the policies with regular training on corporate fraud risks.
Make it easy for employees and outsiders to report fraud directly to your organisation with an external hotline that allows anonymous reporting.
Maintain control of your third parties by implementing a third party risk management programme, and ensure those third parties attest to your corporate fraud policies.
Minimise intense pressure to hit financial targets or revenue levels. Many recent examples of corporate fraud were a result of employees needing to hit unreachable objectives.