Fraudulent activities can occur in any field. In the current economic environment, the risks of enterprise fraud management and corruption could increase because people live hard days, financially speaking, which could create the conditions for deviations. Thus, management departments should consider improving the level of awareness of fraudulent behavior within the organization so that all the people working in a company are more careful and more likely to report attitudes that have the potential to be unethical. For enterprise fraud solutions, please read the following article.
Understand Everything About Enterprise Fraud Management
Identifying if there is a fraud issue in its early stages is possible with good enterprise fraud management by observing red flags in several company areas. For example, in the purchasing department, indicators of suspicion may include unjustified price increases, a close relation with a supplier that is not commercial, communication with a supplier through a particular person, loans without a reason or payments in advance to suppliers, collaboration with suppliers who have little visibility and experience in the market or with those who are dependent on the organization, or, of course, information received from an employee regarding potential irregularities noticed in the activity of a supplier.
Search for Enterprise Fraud Solutions
Something that you can consider as a good measure is organized discussions with employees, verification of supporting documents, or data analysis, which is essential for seeing the overall picture of fraud. When discussing enterprise fraud solutions, organizations must understand that management teams must appropriately approach fraudulent behaviors. Specifically, the organization’s leadership should take a firm view of fraudulent behavior and tell its employees that they will have zero tolerance for those implied in any scheme of this type. An organization should prevent fraud rather than manage its effects, which can be devastating after taking too long to discover.
Another effective fraud deterrent is a robust control mechanism that implements appropriate strategies and adequate controls to prevent any wrong things they can find in their companies during an audit. Another thing that managers can consider is adopting a fraud response plan if such events occur, to look for what has happened, to determine the extent of the problem, and come up with solutions to recover losses. Additionally, this plan will help reinforce the company’s zero-tolerance-for-fraud policy. Employee training is another essential element of any enterprise fraud management within a company.
Considering the dynamic way of working in recent years, which combines office with remote, most companies can opt for specific programs. Using a particular platform can help employees learn how to prevent any situation that can lead to fraud. Once employees complete anti-fraud education programs, the organization will likely help prevent, identify, or report any activity that could lead to fraud. However, training programs must occur regularly because only one course may not be sufficient for enterprise fraud solutions. In conclusion, fraudulent action often occurs within organizations without a well-designed control mechanism.
How Do You Detect Fraud Within the Company?
Detecting fraud within the company is the most critical stage in enterprise fraud management. The investigator often looks for signs that could identify fraud, but in many situations, occupational fraud surfaces in surprising ways. In unfortunate cases, organizations should opt for assistance from experts who can help with measures against fraud and develop solutions that help solve the problem in the short term. Although it may seem surprising, fraud investigation often starts after receiving information from an employee. Practically, 40% of frauds are discovered this way: a small tip, a lead for investigations from within the company.
Another way in which frauds come to the surface is through management performance appraisals. Investigating the managerial process and detecting anomalies solve 15% of fraud cases. Among the methods used by private investigators to identify frauds and find enterprise fraud solutions are auditing or external analysis, studying and interpreting company documents, monitoring the activity of employees, notifications received from the authorities, IT controls, or, in the rarest cases, the perpetrator ends up confessing himself fraud. In other words, the one who reports occupational fraud is, in most cases, an employee. In most cases, the investor or business owner is the last to know about the fraudulent situation.
Anti-fraud investigators divide fraud detection methods into three categories:
- Passive detection methods
- Potentially active or passive techniques of debunking
- Active fraud detection methods.
Correlated data showed that passive methods of fraud disclosure caused higher value damages, were discovered after a more extended period, and involved higher costs for the company, which is why enterprise fraud management is so important. Among the passive methods, the most well-known are:
- The accidental discovery of a fraud
- The confession of the fraud by the perpetrator
- The notification from the police
Fraud Can Occur in Any Business
Potentially passive or active fraud detection methods refer to the results of an external audit or a tip from an employee. In contrast, active methods refer to anti-fraud investigations conducted to uncover problems and bring enterprise fraud solutions. In this case, frauds are not discovered by chance, but concrete efforts are made to unravel the conspiracy. Among the active fraud detection methods, we mention document examination, management evaluation, internal research, accounting reconciliation, IT controls, and company activity monitoring.
Given that in 40% of fraud cases, the debunking is done through a tip, it is interesting to whom precisely this tip reaches. In general, in situations with an investigative lead, the whistleblower does not use formal reporting mechanisms or channels but prefers to talk about his suspicion directly with his superior, the anti-fraud investigator, or other people considered “in authority.” That is precisely why enterprise fraud management is critical for companies to have periodic employee training about the information they can send or receive regarding possible fraud and what to do when they encounter such situations.
The existence of a secure channel of communication through which employees can relate their suspicions or certainties of fraud is beneficial and recommended for all companies. Anti-fraud investigations aim to find the truth, and active methods of detecting fraud are the most effective and profitable for the company. That avoids situations, where the company finds out too late about a fraud, the value of the damage is increased, and the fraudulent phenomenon, affects the reputation of the company and investors. As this happens, developing enterprise fraud solutions that can solve the problem quickly will be more challenging.
