Fraud Prevention: What We Can Learn From Fighting a Pandemic to Help Combat Fraud
August 04, 2020
Fraud Prevention: What We Can Learn From Fighting a Pandemic to Help Combat FraudDownload Article
Since the outbreak of the COVID-19 pandemic, the global economy has slowed with a significant number of people across a large number of countries at home in mandatory lockdowns. The pressure on governments to deal with weakening economies and health issues was unimaginable only months ago. At the same time, financial pressures continue to mount on both companies and employees meaning the risk of fraud is heightened.
The increase in risk of fraud resulting from the pandemic, in particular employee misconducts can be explained by the following examples consistent with the three elements of “the fraud triangle”:1
- Increased financial needs for management that are facing pressure to meet key financial targets or employees who may have taken a pay cut;
- Opportunities for fraud given the internal controls of the organisation may have changed recently to adapt to working from home; and
- Rationalisation of employees who might be afraid of losing their jobs after being committed employees.
Whilst there is no definitive roadmap for companies navigating the current unprecedented conditions, a review of how governments have laid out plans to combat COVID-19 provides some insights into how companies can mitigate the risk of fraud.
From a prevention perspective, there are considerable parallels drawn between these plans laid out by governments to combat COVID-19 and those set out by organisations against fraud.
Three key steps in fraud prevention
Similar to strategies employed by government health authorities around the world in addressing COVID-19, companies may consider the following three key steps in reducing fraud risk: Education, Testing and Recovery. The insights companies can glean from governments may be simple, but they are fundamental to limiting the risk of fraud. They also serve as a timely reminder that simplicity is sometimes the most effective plan.