Fraud Prevention: What Every Organisation Needs to Know
If you were to go by the news headlines alone, you’d think that workplace fraud consists only of large scale embezzlement.
But it occurs in many different forms.
An employee may use a corporate credit card for personal purchases. Another employee may purposely neglect to return a company laptop. Another employee may take proprietary information out of an open recycling bin.
This week, International Fraud Awareness Week is reminding everyone to improve their fraud protection safeguards – to secure the workplace, better protect their reputation, and reduce the risk of fraud.
Organisations lose about 5% of annual revenues to fraud, according to the Association of Certified Fraud Examiners (ACFE).
A Kroll Global Fraud Report published in 2013 showed that overall, 72% of companies had been hit by fraud led by at least one insider.
A recent Wise Workplace post put the spotlight on what's motivating insiders to commit fraud:
Workplace Dissatisfaction: Employees who are not content in their jobs sometimes turn around and steal from their employers as a form of payback.
Solutions: Deterrence starts with controls such as surprise audits and management reviews as well as making everyone aware that fraud will not be tolerated. At the same time, it is most important to create a positive work environment where employees feel safe, happy, and valued. A culture of security that is adhered to from the top down should include written fraud protection policies. Have a dedicated fraud team, and keep lines of communication open. Being proactive is associated with reduced fraud losses and shorter fraud duration.
Financial Hardship: ‘Living beyond means’ is the top behavioural red flag – fraudsters displayed it 43.8% of the time in the ACFE’s 2014 Report to the Nations on Occupational Fraud and Abuse. Other financial difficulties, dealing with an addiction and personal problems also lead to workplace fraud.
Solutions: Provide ongoing training for the board, management, and all staff about the behavioural traits of fraudsters (fraudsters usually display at least one). Provide a tips hotline too. The ACFE study showed that in 42.2% of occupational frauds, a tip lead to the initial detection. The Kroll report showed that about half of companies still have not invested in staff training around fraud and the creation of whistle-blower hotlines.
Opportunity: Trouble-free access to information is often the reason fraud occurs. Keep in mind that 82% of fraudsters in the ACFE study were first-timers.
Solutions: Divide responsibility so that no one person is responsible for managing company finances (Kroll showed that 32% of the time the main perpetrator was a senior or middle management employee). Put data monitoring in place as part of the document management policy, and embed physical controls into the workplace. For example, partner with a trusted shredding company for secure disposal of information. Replace open recycling bins with locked consoles, and schedule regular on- or off-site destruction services for paper and electronic information. A Shred-it All policy also helps prevent fraud.
Start Protecting Your Business
To learn more about how Shred-it can protect your documents and hard drives, please contact us to get a free quote and data security survey.