Five best fraud and risk management strategies
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It has become a necessity for organisations to constantly improve upon their fraud and risk management strategies as fraudsters continue to stay ahead of the best fraud detection models.
On average, companies around the world lose 5% of their gross revenue to fraudulent activity. This percentage is alarmingly expected to increase as the fraud industry grows at an accelerated rate.
With the pandemic affecting global economies, the risk caused by fraudulent activity can have the potential to bring down an organisation. Aside from this, it can also negatively affect the organisation’s stakeholders.
Because of the huge risks that fraud can bring, it is important that an organisation utilises the best fraud and risk management strategies to protect itself.
Fraud and risk assessment
In order to protect your organisation, you should first identify its areas of vulnerability by conducting an in-depth risk assessment. This will let you look at all types of risks your organisation faces, how likely they are to happen, and the cost involved with each one.
One of the best ways to conduct a fraud and risk assessment is to start with the employees. With internal fraud being considered as one of the most common cases of fraud, an organisation should have an understanding of how their employees interact with company resources on a day-to-day basis. The organisation’s leaders should assess their internal communication tactics and system implementation in order to prevent internal fraud.
Assessing the potential risks can also include the establishment of an organisation’s risk tolerance limit. A risk-tolerance limit sets a maximum amount for losses, making the risk assessment quantifiable and creating a cost-effective framework.
Fraud and risk governance
After the fraud and risk assessment, the organisation’s stakeholders should be educated on the dangerous nature of fraud and risk. Fraud and risk management should be enmeshed within the organisation’s culture.
Aside from this, assigning someone or a group of people who will lead the organisation’s fraud and risk management program is also effective. Doing so will provide the organisation’s strategies to be monitored and adjusted if needed, while properly communicating with stakeholders on specific action plans.
Fraud and risk detection
To prevent fraud, it is best to detect it early on by establishing preventive and detective controls across the organization. These controls, whether they be manual or automatic, can remove the ability to conduct the fraud or to conceal the act.
Organisations should never consider fraud control as an afterthought, as these tools can create a robust and controlled environment that can reduce potential losses. Fraud control programs should include awareness training for managers and employees to enhance the organisation’s ability to detect fraud.
Fraud and risk prevention
Knowing the potential risks, establishing an adaptable strategy and utilising fraud control tools is only just part of the necessary steps to keeping an organisation from being attacked by fraudsters.
One of the best fraud and risk management strategies is the implementation of fraud detection tools. Having fraud detection tools, such as multi-factor authentication technology and software that can conduct thorough background checks, is necessary for an organisation as it can greatly help in stopping fraud by detecting it before it can cause any damage.
Fraud and risk monitoring & reporting
Since fraud and risk management strategies should be flexible and adaptable to the changes in the fraud industry, the established strategies should be constantly monitored and reported on.
Reports, being one of the key pillars of fraud detection, can detect fraudulent behaviour within an organisation. Reports must include all relevant information, including date and time stamps, and should be stored and shared efficiently with the right people.
By constantly assessing and monitoring, fraud and risk management strategies can be effective by improving them to cover new vulnerabilities.
Five best fraud and risk management strategies
While these strategies can help in keeping an organisation safe from fraudsters, it is important to note that they will only work if there is clarity within the strategy itself. Keeping a clear vision of one’s fraud and risk management strategy can lead to a strong fraud risk management program that provides the right structures and protocols for the benefit of the organisation.
Eliza is a content producer and editor at Public Spectrum. She is an experienced writer on topics related to the government and to the public, as well as stories that uplift and improve the community.
