Fraud? Deception? Lying?
Organizations of all sizes and across all industries can fall victim to deceit at all levels. Research suggests that the financial impact is significant.
According to a Report to the Nations on Occupational Fraud and Abuse, published by the Association Certified Fraud Examiners (ACFE), the typical organization loses 5% of revenues annually to fraud which equates to a potential global fraud loss of $3.7 trillion.
“The fact is all businesses can fall victim to deceit”, says Andi McNeal, CFE, CPA, Director of Research with ACFE. “Any organization that employs individuals is at risk of being defrauded or deceived by one or more of those employees,” she says. “However, our findings show that organizations that are proactive in preventing and detecting employee fraud and misconduct catch incidents sooner and suffer smaller related losses than organizations that take a purely reactive approach to these inevitabilities.”
ACFE suggests these basic steps to lessen your risk of fraud:
- Be Proactive. Adopt a code of ethics for management and employees. Evaluate internal controls for effectiveness and identify those areas that are most vulnerable.
- Cement Hiring Procedures. When hiring staff, conduct thorough background checks, including educational, judicial, credit, and employment histories as well as references.
- Train Staff in Fraud Prevention. Ensure employees are familiar with basic detection methods and are able to recognize the most common red flags.
- Start a Fraud Hotline. Fraud is still most likely to be identified via a tip. Providing an anonymous reporting system for your employees, contractors, and clients will help to uncover deceit.
- Make Detection a Corporate Priority. Communicate anti-fraud policies regularly with staff as well as ways to report suspicions of misconduct and the potential consequences of committing fraud (termination, prosecution, etc.).
HBC has two CFE’s (Tammy Alsop and Penny Scovill) should a need or suspicion ever arise. They can review areas of high risk or a specific department where management has concerns. Often reviewing and documenting controls can help Board Members or Management fulfill their responsibilities.