Fraud Prevention Tip #44: Prepare for Investigations Before the Alarm Goes Off
Here are a few quick suggestions as you prepare to respond to a fraud incident.
- Be ready to respond to fraud incidents before they surface. Periods of calm like right now are when you put the pieces in place. Then when wrongdoing or fraud is suspected, you already know what to do. You just execute the plan. While every case is unique, there are a few common issues that will need to be addressed, including:
- What are the first steps we’ll need to take?
- Who needs to be notified, and how?
- What were the control weaknesses that allowed the fraud to occur?
- How will we recover our losses – from fraudsters, banks, insurance companies, or other sources?
- How will we handle any publicity from the case?
- What should we tell external authorities? How and when should we do that?
- Identify the skills and relationships that might be needed, and assemble them in advance. These needs may include:
- Experienced investigators
- Forensic accountants
- Information technology experts
- Computer forensics specialists
- Forensic interviewers
- Security and loss prevention
- Internal auditors
- Human resources
- Legal and compliance
- Other technical specialists (construction, contracting, engineering, and other specialties)
- Think through what message to deliver to employees, customers, the press, shareholders and others. Craft the basics of that message now.
- Be clear on who is authorized to investigate, handle requests for information, and interact with any outside parties.
- Be ready to encounter the following from organization leaders:
- Denial, dismay, anger and empathy
- Confusion
- Fear
- Mistakes
- In some – paralysis of thought, decisions and action
What you’ll need to provide in return:
- Calm, objective leadership
- Protection of the innocent
- Experience in risk management
- Confidence
- Consistent measured actions
- Resources
Chances are that fraud detection and response is a rare occurrence in your organization. But that’s no excuse to fail to prepare. Use the items in this article to start a healthy discussion about what to do and what to avoid, especially in the early phases of investigation. Let us know if we can help you prepare.
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.”