Prevention as a Strategy to reduce Risk of Fraud in your Organization
Financial and personal cost of fraud, the reputational damage to entities can be direct and long-lasting. Therefore leaders have a fiduciary duty to implement robust fraud control framework, including policy, legal and governance requirements to protect themselves and the organisation they serve.
The first pillar of an effectives Fraud control strategies is based on fraud risk assessment to determine fit for purpose fraud control program based on culture and exposures. In determining a « fit for purpose » approach to managing fraud risks, allows the resources devoted to preventative strategies and controls to be proportionate to the fraud risk profile as indicated by, for example, the materiality, scope, complexity, and sensitivity of possible fraudulent activities.
Importantly effective fraud prevention/control strategies are an integrated response led by the executive in an entity and embedded in its governance, program design and management. Such a proactive approach assists entities to manage fraud risk to an acceptable level, mindful of the changing landscape, source and types of fraud risk that must be assessed and managed.
Recent research shown effective Fraud prevention strategies as the first line of defense provide the most cost-effective method of controlling fraud within an entity reducing fraud cost to over 60%. To be effective, fraud prevention within an organisation requires a number of contributory elements, including an ethical organizational culture, a strong awareness of fraud among employees, suppliers and clients, and an effective internal control framework.
Key elements of effective fraud prevention include:
- a robust Fraud Policy and Code of Conduct;
- sound fraud risk management processes;
- a comprehensive fraud control plan;
- prudent employee, and third party, due diligence;
- regular fraud awareness training;
- fraud-related controls for activities with a high fraud risk exposure;
- system controls to ensure accurate and up-to-date data; and
- communication about investigation outcomes to demonstrate that allegations and incidences of fraud are serious and appropriately dealt with.
Always the entity should align the resources it commits to preventative strategies according to the fraud exposure of the organisation.
About collected from Patrick Gitau, Supports Creation of Best Practice Standards to support Africa’s Growth
source : Pulse
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