Fraud Prevention Tip #1: Eight Fundamentals of Fraud Risk Management

Every leader in every business, education, government and not-for-profit organization has at least one thing on common. They all want to prevent fraud from happening on their watch.

To build, implement and sustain an effective Anti-Fraud Campaign, here are eight ideas to increase your odds of success.

• Strong Prevention Controls – Formal procedures and daily behaviors directed at preventing fraud are the foundation of any anti-fraud effort. Preventive controls limit access to resources and information. They provide for high-quality recording, review, approval, and summation of transactions and other events. And they ensure that objectives are achieved and organization assets are protected.
• Immediate Detection – Effective anti-fraud campaigns bring the one-two punch of prevention and quick detection procedures. The best assumption is that some wrongdoing will slip through your defenses. When that happens, be ready to find it right away – same day, same week, same month. No more.
• Clear Responsibilities – Every employee, manager and executive must know exactly what to do and what to avoid when they suspect wrongdoing and fraud. Tell them in advance. Don’t leave them wondering about required next steps.
• Anti-Fraud Training – Provide meaningful ‘how-to’ manager and staff training so that everyone knows not only what can go wrong but exactly what it looks like in the records they see every day. Not general awareness sessions; meaningful prevention and prompt detection skills education. Informed employees are your best line of defense. Teach them exactly what they need to know.
• Confidence to Report Suspicions – Your team needs to feel confident to speak up. They must feel safe. They are the heroes you must have ready to take action and report what doesn’t look right to them. Break down any barriers that discourage reporting. Make it easy to report – including anonymously.
• Open Brainstorming of Risks – Have you ever initiated an open discussion of what could go wrong? If not, start today. Bring it up in a staff meeting. Say, “You know, we’ve never talked about fraud risks in our business. Let’s do that right now.” Get the input of everyone. You’ll be pleasantly surprised just how willing they are to share their concerns – and their willingness to better manage your risks.
• Pre-plan Your Response – Fraud Risk Management includes planning in advance how you will respond if fraud does occur. Who should be involved? Who takes the lead? What resources will you need and who can provide them? Minimize the need for crisis-based decisions. Build the shell of your response in advance – before you need it.
• Take a Strong Position in Legal Actions – Think seriously about your appetite for legal action before you need to pursue those options. Anti-Fraud Campaigns include an organizational stance that openly says, “We won’t tolerate it here. And if you target us, expect a fight!” Isn’t that what your honest employees, agents, vendors, customers and other stakeholders want to hear?

How does your organization stack up? These eight ideas form the foundation of a meaningful Anti-Fraud Campaign. But they are just the start.

This is the first in an in-depth series of fraud prevention blogs and articles we’ll be publishing in the coming months. Be assured we’ll go deep on these eight ideas and many, many more.

Stay tuned – and never hesitate to reach me if you want to kick around ideas or have questions related to implementation in your own unique organization. We’re here to help. Just ask.

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”