If we look at the world of business today, increasingly one of the greatest threats to our business is from fraud. Fraudulent behaviour covers a multitude of situations and attacks on our business from any one of a number of players.
Fraudulent attacks come from major crime gangs or people masquerading as consultants, genuine suppliers, or customers, or investors.
The less obvious fraudster attackers are supplier and customer managers who have no intention of honouring contracts as signed, although they may deliver or pay eventually. Their actions still contribute to a loss of reputation, lost sales, poor cashflow and increased operating expenses.
The other group of fraudsters come from within the organisation itself. These people include, managers who accept bribes, or are focused on self-interest rather than the welfare of the business or assist outsiders to perpetuate acts of fraud etc.
The other group of internal fraudsters are trusted employees, disenfranchised employees, salespeople with unachievable sales targets, employees who steal accidentally and then find they get away with their thefts and so repeat them.
Successful fraud attacks can occur due to the following factors, or a combination of these factors which include:
a lack of business controls and poor operational disciplines;
lack of due diligence;
out of date technology tools or those from a multitude of vendors;
alienated or untrained employees;
operating short staffed over a protracted period;
dishonest managers; and last but not least
outsourcing of key operational roles.
Occasionally fraud happens despite the business operating to best practices due to bad luck. These situations rarely cause the demise of the business or cause major damage if a solid business has been established with good processes and long-term and committed employees. These are the core defence mechanisms which help expose frauds at an early stage.
To minimise the chances of any attempted fraud being successful, the main factors which help prevent fraud are therefore:
an organisational culture which creates a positive team environment;
professional and committed managers and employees who understand the behaviour and practices of the business’s customers and suppliers;
good employee working conditions with adequate pay and achievable operating and sales budgets;
adequate numbers of employees to do the work to ensure all work is completed promptly and done properly the first time;
an ongoing campaign against mistakes and proactive actions to ensure the same types of mistakes are eliminated, or at least minimised;
proven operating systems and processes coupled with strong business disciplines; and
access to a whistleblowing facility.
Innovation is one of the most used words or concepts used in business today. It is therefore surprising that the word innovation is often not used in the protection of the business’s cash and assets until they have been lost.
The problem for all businesses is that fraudsters are always innovating and this is what makes fraud such a successful business.