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Corporate Fraud and Corruption
Preventing Corporate Fraud and Corruption
Corporate fraud can cause financial and reputation damage as well as legal fees and fines. A typical firm loses 5% of its revenue to fraud annually. Adequate internal controls and a culture of ethics and integrity are crucial elements to help identify and prevent fraud.
Enforcement actions for fraud, bribery, and corruption are at an all-time high. It usually hard to detect fraud and often causes more than just financial damage. Despite this, many firms do not have a specific program in place to address fraud. It’s easier and less costly to implement prevention and detection techniques than recover losses once they’ve happened.
Your risk and compliance program should ensure employees fully grasp what constitutes fraud and have the proper tools to report it when it occurs. Your employees are your first line of defense and are often aware of unethical business practices and corporate corruption. A fully integrated, risk-based system that includes policies, training, open communication lines, and third-party risk management can help your firm mitigate the risk of fraud.
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What You Need
Policy Management
A system that ensures your employees read and sign your corporate fraud policy
Report Intake & Management
Multiple methods for employees, customers and vendors to report fraud, including a whistleblower hotline
Awareness
Ongoing reminders to keep fraud prevention top of mind, including posters with your hotline number
Visual Training
Annual training that provides employees with a deeper level of understanding of corporate fraud and appropriate ethical behavior
Monitoring
A way to monitor your third parties on a daily basis, and a proactive plan to deal with reports of fraud
Internal Controls
Appropriate internal controls such as segregation of employee duties and documentation checks, and annual audits to ensure these controls are maintained
Open Communication
A positive workplace culture with open lines of communication with management.
Plan
A methodology in place for responding to and investigating potential instances of fraud
Steps You Can Take to Address Corporate Fraud
STEP 1
Maintain and communicate strong corporate fraud policies and ensure all employees attest to these policies with a policy management system. Follow up the policies with regular visual training on corporate fraud risks
STEP 2
Make it easy for employees and outsiders to report fraud directly to your organization with an external hotline that allows anonymous reporting
STEP 3
Maintain control of your third parties by implementing a third party risk management program, and ensure those third parties attest to your corporate fraud policies
STEP 4
Minimize intense pressure to hit financial targets or revenue levels. Many recent examples of corporate fraud were a result of employees needing to hit unreachable objectives