The very nature of making and handling money puts businesses in a precarious situation of being susceptible to fraud. It’s typical for companies to lose an average of 5% of their annual revenues to fraud, according to a report by the Association of Certified Fraud Examiners in 2018.
Today, there are very few businesses, regardless of size or structure, that can claim immunity to cyber security fraud. Savvy businesses must stay vigilant as fraudsters can be disguised as employees, contractors, and even customers, which is why many technical teams rely on a robust biometric identity management system to protect their operations, reputation, and finances.
6 Tips to Help Prevent Fraud for Businesses
1: Know your business inside and out
If there’s someone with an in-depth knowledge of your business, it should be you. You’re supposed to be on top of things, and this includes the day-to-day processes, the people you employ, the suppliers you work with, the money you make, and the money that goes out of your accounts at any given time.
It’s your business to know and understand these things so you can spot any irregularities. Even if you’re not directly involved in every aspect of your business, letting people know you’re aware of what goes on in the company can make someone think twice before engaging in dishonest acts.
2: Conduct a thorough background check on all employees
It’s only prudent to protect your business from every potential source of fraud, including your employees. Insider fraud isn’t only limited to entry-level and mid-level employees but also directors. Regardless of their positions, employees may use their insider advantage to engage in fraudulent schemes.
Unless you do a background check or run a credit report on new employees, there’s the risk you may be opening your doors to dishonest people. Similarly, it would help to enforce an ethics policy where current employees are briefed on what constitutes fraudulent actions and how the company would sanction offenders.
3: Protect your computer network
Businesses handle sensitive information day in and day out, including customer data and proprietary data. As big as the amount of data you must protect, the number of ways that fraudsters can gain access to them also keeps growing—malware, hacking, data theft, and identity theft, among others.
Fortunately, you’re not left without defense. From password managers to VPN routers and identity management solutions, you can secure your network and data to prevent them from falling into the wrong hands. It’s also recommended to enforce policies on data handling as well as confidentiality and non-compete agreements.
4: Identify the most critical areas in your business
Think about how fraudsters or scammers—both insiders and outsiders—can attack your business to help you develop an effective fraud detection and prevention strategy.
For instance, if you’re in the manufacturing business, the company’s inventory tracking and handling units may be an area of concern. You’d want to ensure that employees are following procedures on receiving incoming stocks to avoid missing inventory.
Accounting is yet another hotspot for fraud. Fake invoices, bad checks, or counterfeit currency are some of the common ways you could lose money.
5: Double up on audits
Audits on company finances, inventories, and even IT systems are among the most effective strategies in detecting and preventing fraud. Conducting regularly scheduled audits, as well as surprise audits, provide a clear picture of how your company is performing and reveal any weaknesses in your systems or processes.
Besides having internal auditors, an external auditor may also be required to help ensure your business’s compliance with applicable laws and regulations.
6: Ensure checks and balances
Checks and balances strengthen internal controls within a business, helping you avoid fraud. One way to do it is by separating certain duties or functions. There must be a different person initiating a purchase and another one approving it, or someone who prepares the payroll must let another person handle non-payroll employee records.
Don’t Fall Victim to Business Fraud
Business fraud comes in all shapes and sizes. It can damage your company’s finances, reputation, and relationship with all stakeholders.
Fraud risk management and business fraud prevention should be your top priorities. The solutions we offer can complement your efforts in enhancing the security of your business. Contact us to know more.