Organizations worldwide lose an estimated five percent of their annual revenues to fraud, according to the Association of Certified Fraud Examiners 2016 Report to the Nations on Occupational Fraud and Abuse. The median loss per fraud case was $145,000 and more than 20 percent of the cases involved loses of at least $1 million.
Would that be a devastating loss in your organization? It sure would be in ours.
Solid policies and practices can help ensure your business doesn’t fall prey to internal or external fraud. Implementing these five practices will help lessen your business’ vulnerability to fraud.
- Be Proactive
Defending against fraud starts with standing for the right things, hiring the right people, implementing the right IT infrastructure and trusting the right partners.Begin by setting a code of ethics for management and employees that is regularly communicated and adopted throughout the organization.When hiring, conduct background investigations, check credit and employment history and consider their personal values and ethics.As careful as you are choosing employees, be equally as selective when choosing vendors, especially your IT and financial partners. Select vendors that share your ethics and core values.
- Offer Employees an Anonymous Voice
The most common way fraud is detected within an organization, according to ACFE, is by a tip from someone within the organization.To reduce your company’s vulnerability, offer multiple ways for your employees to submit tips. Allowing team members multiple ways to anonymously submit concerns or tips regarding possible fraud will help your employees feel safe.These reporting mechanisms need to not only be anonymous, but they need to be management-free. If an employee suspects fraud because of his boss’ behavior, the reporting process cannot be to go through their boss.A few options for reporting fraud, or suspicion thereof, might be a telephone hotline or an anonymous online form that goes to multiple levels within the organization.
- Protect your Bank Accounts and Credit Cards
Having a personal relationship with your bank and your commercial banker is important. In addition to being your advocate and helping you to choose the right business accounts, your banker will be able to offer valuable insight in protecting your accounts from fraud.
Some ways your bank can help you protect your business from fraud include:
- Setting up separate online login information for your business and personal accounts
- Providing training resources for your staff on fraud detection and prevention
- Creating custom account notifications to alert you of any suspicious activity
- Train Employees in Fraud Prevention
Employees are your biggest asset when it comes to detecting internal fraud. Hold regular, mandatory training sessions for your team, including both new and tenured employees. Use this time to train on what constitutes fraud, how to detect it and offer options for reporting it.Enforce the training by having the information posted and available so employees are reminded of it often.
Your bank may offer training resources, seminars or employee hand-outs. Check with them for more resources on educating and training your staff.
- Implement Internal Controls
While people are your organization’s greatest vulnerability, it’s important to have the proper technical controls in place as well. A few of these best practices include:
- Having a password policy that includes complex password requirements
- Using a dedicated computer for banking
- Ensuring anti-virus, malware and spyware detection software is in place and up-to-date
- Installing surveillance or video monitoring tools
These best practices aren’t difficult – or even expensive – but too often they’re overlooked. Nothing you can do will completely eliminate the possibility of fraud within your organization, but following these tips can go a long way in prevention and detection.
Wondering if your business has the necessary practices in place to protect against fraud? Reach out to one of our commercial bankers to discuss where your business may be vulnerable.
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Meet with a One of our Experienced, Commercial Lenders.