Every business is vulnerable to fraud. That’s largely because there are so many different kinds of fraud that you don’t think will take place. Globally, organizations lose an estimated 5% of their annual revenues to occupational fraud, according to a survey of Certified Fraud Examiners.
It’s an employer’s worst nightmare, an employee is dissatisfied with his or her job and decides to defraud or steal from the company. There are plenty of stories about employees committing these crimes and causing enormous damage.
However, there are some measures to take to help safeguard your business against hackers, cybercriminals and identity thieves. By recognizing signs of occupational fraud and implementing practices to prevent it, you can lead a happy and productive workforce.
Types of occupational fraud include embezzling, insider trading, forging checks, expense reports and vendor invoices, or any other type of internal fraud. For a small company, this could mean the end of the business. Small businesses are more at risk because owners inherently treat their employees like family, leading to complacency and lax security measures. Small businesses also tend not to have anti-fraud measures in place as many lack the know-how and enforcement capabilities of larger businesses. Nearly half of victim organizations do not recover any losses that they suffer due to fraud.
Here are some techniques you can incorporate into your business practices.
- Develop a culture of security that sets an ethical tone, and sends the message that dishonest behavior will not be tolerated. Let employees know there are policies on employee theft in place. Don’t assume they are already aware of the policies and the consequences of fraud
- Establish an anonymous tip line that employees, clients or vendors can use to report cases of occupational fraud
- Schedule different types of security audits. Include internal audits, management review and external audits. Use surprise audits to create a perception of detection in the workplace. Set up and maintain effective internal financial controls to ensure you’re not losing money as a result of fraud
- Implement other internal controls including reference checks in hiring, mandatory vacations, segregation of duties, vendor bidding process, and a comprehensive documentation management process. Perform a pre-employment screening on all potential employees. A resume might not tell the entire story about a prospective employee’s past
- According to ACFE’s study, more than 80 percent of the frauds in the report came from employees in one of six departments: accounting, operations, sales, executive/upper management, customer service or purchasing. Recognize these high-risk departments as potential sources of fraud and implement the proper policies to prevent it
- Don’t get complacent. Any employee can commit fraud at any time. While most fraud is committed for monetary gain, that doesn’t mean an employee won’t commit fraud if the opportunity is there
- Focus on prevention, not recovery. The process of recovering the losses from a fraud can go on for years. It is clearly more cost-effective to prevent fraud with proactive controls, rather than to hope to recover losses after the fact.
Purchase insurance. While there are many precautions you can take, no measure is foolproof. If a fraudulent attack occurs, having insurance is crucial. Although it can’t prevent the attack from happening, Insurance makes it easier to return to day-to-day life in the event of an attack. Depending on the provisions of your policy, it may report the problem to creditors and reimburse you for money taken.
Read more: https://beyondnumbers.ae/five-things-all-budding-entrepreneurs-should-know