Managing the Risk of Fraud - Protecting Your Business and Assets

Fraud is an ever-present risk to business; however, the outbreak of COVID-19 has significantly increased that risk. With mounting financial pressure, management focus diverted to survival mode, and the necessity to conduct business in new and novel ways, it’s easy to understand how senior executives may be distracted from significant changes to their fraud risk profile.

Fraud risk assessments should be undertaken regularly, but it is particularly important to review those assessments when there are significant changes to the structure, function or activities of your business. There are few changes as significant as COVID-19 impacting businesses in recent history. Accordingly, now is the time to reassess your exposure to fraud.

Understanding Where You May Be Exposed

Key fraud risks exist where cash and other assets can legitimately enter or leave the organisation. Typically, these avenues include Accounts Payable, Accounts Receivable and Payroll (including expense reimbursement claims).

Concentrate your efforts on these areas, ask yourself whether any processes have recently changed? For example, is e-commerce or online transactions a new channel for your business? Has the nature of the risk changed or have new risks emerged? How has this impacted on the effectiveness of your control structure? Examine controls such as:

Segregation of duties.
Authorisation for banking and other transactions.
Delegations of authority.
Due diligence of supplier and customer records to avoid false suppliers or customers being created.

Don’t forget the risk of corruption, including bribery and exchanging secret commissions (kickbacks) and inappropriate relationships (e.g., inappropriate favourable treatment). These risks exist wherever there is human interaction.