With an ever-present threat of fraud being perpetrated against businesses, it is vital to safeguard your organisation. As cyber criminals become more audacious, being proactive reduces your vulnerability and improves the chances of spotting fraud at an early stage.
So how do you protect your business and exercise best practices in fraud prevention? Firstly, consider where the weak points in your company might be and the types of fraud to which your business may be particularly susceptible.
Conduct a full Risk assessment for your organisation
Understanding where your risks lie concerning fraud helps you direct your anti-fraud resources to the right places and lowers the chance of an attempted fraud being successful. This process starts with a risk assessment covering your entire business.
You will need to consider internal and external risks and potential weak spots and formulate a plan to bolster security within the business. Corporate governance has a significant role to play in fraud prevention, for example, defining the types of fraud that might threaten the business to narrow down where responsibility lies in terms of governance.
Corporate governance and fraud prevention
Good corporate governance provides a clear framework for accountability, transparency of actions, and the ethical behaviour expected of its board and key officers. On a practical level, it supports a culture of honesty and integrity and can reduce the likelihood of ‘white collar crime’ through strong internal controls and segregation of duties.
White-collar crime is typically financially motivated and carried out by business people in positions of power and authority. The culture within a company can make it difficult for employees to report such crimes, however, or express their concerns.
Corporate governance, therefore, should incorporate clear ‘whistle-blowing’ procedures that provide a safe path for reporting suspected white-collar crime or raising concerns about the actions of a board member or senior executive.
Where might a business be vulnerable to fraud?
Possible areas of weakness could include:
Asset holding and misappropriation
Misappropriation of assets includes cash and inventory, as well as hard assets used regularly for business operations. Keeping an asset register or log helps to safeguard the company from unauthorised use of a piece of hardware or equipment.
You could control access to computers or business systems by using unique passwords given only to those authorised, for example. This lowers the risk of fraud and provides a record of an asset’s use over time.
Financial records and accounts
Overstating or understating figures in the company’s financial statements is a form of white-collar fraud commonly perpetrated by individuals who are able to override the company’s internal controls and systems.
Regular and rigorous auditing helps to identify anomalies in the business’s financial records so they can be investigated quickly for potential fraud. Segregation of duties and responsibilities can also make it more difficult for fraudsters to operate within a company.
Hardware and software
Cyber-attacks can cause serious financial loss for businesses that are unprepared and unprotected. Once cyber criminals have accessed your system it can also lead to significant loss of reputation.
Considering the security of your business’s hardware, software, and wireless network, and upgrading where necessary, helps to address the constant danger of cyber-attacks and protect the company from new and emerging threats.
Regularly update your system and employ robust anti-virus and anti-malware software to deter cyber criminals. It is also crucial to secure your website and domain and protect email software using spam and virus filters, as well as transport encryption should your emails be intercepted en-route.
Targeting staff
Cyber thieves may target members of staff via phishing emails to uncover sensitive business information. Regular staff training on the different forms of cyber-attacks and how they are typically conducted provides additional protection for your company.
Knowledgeable employees can be one of your first lines of defence against digital fraud and help you identify attempts to access important commercial information. Keeping up to date on new forms of cybercrime also maintains this protection and keeps fraud front and centre as a topic of concern.
Safeguarding your business and responding to fraud
A comprehensive fraud prevention programme tailored to your business will include your highest-risk fraud scenarios and how you will respond as a company should an attack be successful.
A rapid response using pre-planned steps forms an important part of your anti-fraud strategy that helps to minimise the damage to your business and ensures that you can secure it quickly once again.
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About the author:
This article was written by guest author Paul Williamson of Selling My Business. Paul’s expertise is in the valuing and sale of businesses and commercial properties on behalf of clients. Over his extensive career, he has been involved in the sale of literally thousands of businesses, from relatively small retail businesses to more notable, multi-million-pound business sales.