Recognizing Fraud Exposure in a Struggling Economy

In today’s current struggling economy, we should anticipate that an increased focus will be placed onto companies and persons that make bad decisions. When a company is in major financial trouble, the public may ask, ‘How did this happen,’ or ‘Didn’t they see this coming?’ The negative impact can seem obvious after the fact, but at the time the incorrect decision was actually made, one has to question if the necessary material was ever presented to make a well-informed decision.

Too many companies and leaders are finding themselves saying ‘I would have done things differently if I had known.’ Can you think of some executives or companies that have uttered these words recently? What about your own organization--how comfortable are you with the information you receive to make critical decisions?

The following are some essential tips relative to mitigating the risk of a fraud that all leaders and organizations should understand.

Due Diligence as a Competitive Advantage:

If you need an industry example of why due diligence could be a competitive advantage, look no further than to the real estate industry and the risk of real estate fraud. Consider for a moment how a lack of knowledge could impact a company’s bottom line and the types of fraud risks that could have been mitigated if increased levels of due diligence where procedurally in place.

Each organization should discuss methods of fraud exposure they feel they are susceptible to. These discussions should lead to the development of policies and procedures that can help mitigate fraud risk. There are four essential steps each company must take to help begin the process of mitigating risk:

1. Recognize the risk
2. Discuss consequences
3. Develop a tactical plan
4. Implement and monitor the tactical plan.

Recognize the Risk:

By sitting down as a leadership team, your company has taken the first step. Recognizing the risk is admitting your company is susceptible to fraud. When the economy is struggling, it is particularly important that the company is at full strength. Protecting the company from potential fraud is essentially to guarding your company’s health and future.

Discuss the Consequences:

What if fraud does occur? What would it mean financially? What would it mean to the public’s perception of your brand? How would you react? These are important questions to answer. By answering these questions you are also better equipped to discuss what type of tactical plan should be assembled, how fast it must be implemented, and how much you’re willing to pay to help mitigate fraud risk.

Develop a Tactical Plan:

Reaching this step is a turning point in the process. In this stage you’ll want to ensure you have drafted the appropriate policies and procedures with the appropriate team members responsible for monitoring and improving the process. Here you’ll want to consider how you educate the company about managing risk exposure and tools and services will be leveraged on a daily basis to respond to the signs of a potential fraud.

Do you fully know the persons and businesses with whom you conduct business? This is an area where accessing public records can help. As a part of your plan, it is essential to understand how to work with public records and, more importantly, how to find public records in a quick and efficient manner. You’ll be impressed that you no longer need a trip to city hall, or an individual courthouse to access such records.

What other types of risks could potentially occur inside your building? Your company will be impressed to learn about how the advancements in hardware and database software have allowed services such as id authentication to flourish.

When developing your tactical plan, remember to consider the risk and consequences and tailor the plan around your company’s sensitivities.

Implement and Monitor the Tactical Plan:

A plan is worthless without implementation. Implementation needs to involve all members of the organization, from management to support staff. Plan to update the necessary managers with alerts and discuss progress internally. Anecdotal stories of how a potential fraud was recognized, reported and avoided can boost the acceptance of the program among employees. Finally, review the plan regularly to ensure you are keeping up with a changing business environment.

The lesson in this article is transferable to all organizations. By recognizing the types of fraud that could hurt your organization, discussing the consequences and developing a plan that includes employee education and available tools, you can be assured that you are helping to better protect your organization against potential fraud.