The rise in fraud and how to manage the risk

Fraud against businesses in the UK is nothing new. According to figures from KPMG, alleged cases of insider fraud in 2019 were double those alleged in 2018.

In the case of external fraud, more than £1 billion of alleged fraud against both businesses and the general public was alleged to have taken place during 2019. It’s clear that fraud is always a major concern for top finance professionals and for businesses overall.

However, the current global pandemic has led to a further increase in fraud across the board. This is hardly surprising when you consider that all points of the fraud triangle are in place right now. There is widespread financial pressure, significant levels of opportunity due to a lack of due diligence when panic sets in and rationalisation by perpetrators as a result of the unprecedented situation. Given this ‘perfect storm’ for an increase in fraud, top finance directors are ensuring that certain measures are taken, and that effective governance is in place.

Fraud prevention measures adopted by top finance professionals

There are several measures that the most respected finance professionals ensure that their business takes.

• Being aware that fraud can come from anywhere and sceptical of deals that seem “Too good to be true”.
• Having a complete understanding of the business, its operations, employees and regulatory responsibilities.
• Paying attention to full due diligence when dealing with customers and suppliers.
• Testing systems and processes for potential weaknesses and susceptibility to fraud.
• Developing a fraud prevention strategy and communicating it across the business.
• Ensuring that computer systems are protected against cyber-attacks.
• Having a full understanding off all finances and robust checks and audits in place.
• Making sure that fraud is always reported.

These measures can help to protect a business against fraud. However, respected finance directors make sure that they are implemented as part of a structured fraud risk governance policy and process.

Fraud risk governance recommended by the best finance directors

Top finance professionals ensure that robust risk governance is in place and is at the centre of everything that a business does. In addition to implementing measures to reduce the chance of fraud, there are several steps involved in this governance.

Developing risk governance policies

These policies are written down and communicated throughout the business. They cover aspects including:

• Definition of roles and responsibilities.
• A fraud risk assessment.
• Provision of fraud awareness.
• Details of whistle-blower initiatives and protection.
• Advice on reporting potential fraud.
• Fraud investigation processes.

Creating a fraud risk assessment

The fraud risk assessment provides the foundation for fraud prevention within the business. All potential fraud risks are identified. This includes identifying the likelihood of the fraud taking place and the cost of the fraud to the business. Identifying and rating risks in this way helps the business to put mitigation plans in place with the most likely and costly potential fraud taking priority.

Using monitoring and reporting to detect fraud

As part of the mitigation plans to reduce the risk of fraud, monitoring and reporting procedures are put in place. This can include factors such as a whistle-blower strategy. Having these procedures in place helps a business to identify fraud quickly and deal with the problem.

Given the current climate, the most experienced finance directors know how important it is to recognise the dangers of potential fraud and implement measures and governance procedures to provide protection for the business.

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