Fraud poses risk to every business no matter what size they are, what industry the operate within, or how much or little revenue they create.
Fraud directly harms the health, reputation and potentially the survival of the business. Employees, customers, suppliers, commercial networks and the industry itself all feel the force of fraud when a business has been targeted.
In fact, fraud within business even extends to impacting the national economy with costs caused by fraud in the UK amounting to billions every year.
Fraud can range from small acts of dishonesty to obtain a slightly higher expenses pay out or a few extra days paid leave, to the long-term embezzlement of significant funds or the complete collapse of a business engineered through cyberattack.
Fraud can be perpetrated by employees or directors within the company themselves, contractors or individuals with internal access to a company such as accountants or marketing agencies, suppliers, customers, competitors or, indeed, any external individual or group with either something to gain or an axe to grind.
There are many ways in which fraud poses risk to a business and can harm its revenue, reputation, infrastructure, productivity, and growth. The most effective means of addressing fraud is prevention and there are numerous actions that any business can take to protect their business and reduce risk of fraud, therefore minimising the likelihood of harm.
A good place to start is to determine what areas of vulnerability exist within your business and how fraud might be facilitated; every business is different and operates in different fields. Exploring the nature of your business and where weakness lies can help you to understand where harm may arise and risk assess in a targeted and effective manner to implement the most pertinent and valid preventative measures.
For example, a company that processes significant personal and confidential information is at high risk of data breach or misuse of information whereas a business that holds high value stock is at risk of theft or asset misuse. Consider the elements of your business that may offer incentive or reward to potential perpetrators and act to defend those areas.
Once you know your business and its areas of fortitude and vulnerability, make sure you really know about the people involved or having access to, or influence over, it; these include employees, customers, suppliers, associates, contractors and competitors.
Employees can be the greatest strength for a business but also pose the highest risk of fraud due to the access and knowledge within the company that their work necessitates.
It’s important to ensure that any potential employee is who they say they are and have the identity, experience and qualifications they allege. Undertake background checks on any individuals you intend to recruit and request ID, copies of certificates and valid references.
You can also further investigate references by calling the person said to have provided them and confirming the business they work for and their job role is genuine. Once in work, you can monitor physical behaviours of employees through the use of surveillance equipment such as CCTV and this can also act as a deterrent for any individual considering misusing company assets or stealing stock or company property.
Put in place systems to spot check financial records such as accounts or expense claims to look for any anomalies or potential extortion, keep in contact with staff who have taken long term sick leave and be present in the physical and online work environment.
Customers are the life source of your company and the large majority will only have an interest in receiving your products or services.
However, the odd few can have a more complicated agenda and can cause financial harm to your business through payment with the use of forged or stolen bank details or cards or through developing a relationship with the company to obtain credit which is then never reimbursed.
The business can be at a loss for products or services that are not paid for or which transactions need to be refunded for alongside potential banking charges and fees. It’s important to have an idea of a customer’s profile and background before agreeing any credit provision and there and request ID. Consider any irregularities in purchase behaviour such as products being shipped to different addresses or even overseas.
Any behaviour that presents as odd needs more careful investigation and further consideration before engaging with this customer again. You can also implement the use of verification systems to better protect online transactions such as verify or securecode provided by visa and mastercard. If you deal with trade customers you can research their business, public records and reputation and request references.
Suppliers will usually be seeking to further their own business and will want to build a good relationship and reputation with you.
However, any financial involvement with another business is open to exploitation and this could be through gradual increase and overcharging, unexplained fees or charges or another individual or group posing as the supplier you know and trust and conning you into setting up payment into a new account that never reaches the hands of the genuine supplier and leaves you in debt and incurring potential further charges.
Check a supplier’s reputation and background online through searches (perhaps even use keywords con, fraud or scam to bring up complaints from previous customers). Confirm their details match with those you have been given with Companies House. Once you’re happy to purchase, set up a single point of contact within the company whom you can get to know and trust and who will be the person to advise you of any changes so you know this is authentic.
Ensure that you then monitor the supplier ongoing; check invoices and deliveries or services received and continue to undertake online searches to ensure that the company has not fallen into disrepute or concerns have been expressed by other businesses or individuals they deal with.
Lastly, it’s important to know your business’s assets and ensure that these are correctly recorded and robustly monitored.
Lack of consistent processes and sloppy or inaccurate recording leaves assets open to theft or abuse; information can be breached or shared inappropriately destroying a company’s reputation and leaving it liable for hefty financial penalty, property can be stolen or fraudulently sold on and company resources such as computers or fleet cars can be abused.
There are many ways that assets can pose risk to the company if not managed correctly and vigilantly monitored. Ensure that there are systems in place that know where all your physical assets are at any time and who has access to them; keep this updated and current.
Only permit a necessary and minimal number of employees access to sensitive information or record keeping and check digital footprints to ensure that no one who shouldn’t see it has gained access. Implement procedures for regularly spot checking employee asset use and access, and records within accounts, pay roll and invoicing to detect any anomaly early on and address this with staff.
In conclusion, fraud poses considerable and wide ranging risk to any business.
Preventative actions and processes reduce the risk of future harm occurring. However, if you have been too late in implementing these or if prevention has not been enough and you think that your business may be falling victim to fraud, an effective response is to recruit the services of a private investigation agency to undertake full corporate investigation into the situation; these are the experts in detecting fraud and will be able to identify any current scams underway or advise you on the potential areas of risk and vulnerability within your business and specific prevention methods to ramp up your safeguarding capacity.