How to protect your company from fraud

in Managing by Nigel Bowen
(2 Ratings)
protect your company from fraud

While it's difficult to source local figures, the global statistics on fraud should be alarming enough to motivate you to protect your company. A worldwide PricewaterhouseCoopers (PwC) study in 2009 found that one third of the 3,037 companies surveyed had been the victim of an economic crime in the last 12 months alone.1 A more recent global study carried out by the Association of Certified Fraud Examiners in the US found companies with less than 100 employees suffered the greatest percentage of frauds (accounting for more than 30 per cent of the victim organisations) and experienced a median loss of US$155,000.2

The moral of the story? Unless you put procedures in place to protect your company from fraud, you should expect someone to take advantage of your trusting nature. Here are three simple strategies to mitigate the risk.

1. Have clear policies and enforce them

According to the PwC report, the majority of economic crimes were perpetrated by employees rather than well-publicised cyber criminals – and in some industry sectors internal perpetrators were responsible for up to 80 per cent of all cases.1 Assuming you have sensible policies in place to weed out any potential employees capable of such actions (i.e. mandatory reference checks), the next step is to make it clear to staff what is and isn't acceptable and to be consistent in enforcing the rules.

Is it a sackable offence to take a stapler home? How about a box of photocopying paper? What if it's the whole photocopier? In the absence of clear lines, you could be leaving it up to your employees to make their own rules, with some deciding they 'deserve' a few extra perks. If you do choose to forgive a staff member for fudging their expense account, make sure you keep detailed records of the incident and issue a written warning. If you end up having to fire them for another infraction down the track, you don't want to be in a position of liability for an unfair dismissal claim on top of the money they've already pocketed from you.

2. Divide and conquer rorting

Never give a single employee too much control over the company finances and make sure nobody gets to operate without regular oversight. It isn't unheard of for groups of employees to collude to defraud their employer, but the far more common scenario is for a single person to give into temptation and start skimming because he or she thinks "no one will ever know". Regular audits - or, even better, frequent surprise audits - will also send a clear signal to staff that they'd be foolish to give into that kind of temptation.

3. Be cyber smart

While combating insider fraud should be your major concern when working to protect your company, cyber crime from external sources is a real and growing menace. Err on the side of caution by limiting or, ideally, eliminating access to non-work emails and sites on company phones, computers and tablets. Have a firewall, as well as antivirus, spyware and malware detection software in place, and insist all staff create complex passwords, use different passwords for different online and system accounts, and change their passwords at least once every 90 days. If it's feasible, it's good to have one office computer solely dedicated to online financial transactions (and nothing else that will increase its vulnerability to cyber attack).

One last thing to be mindful of is that the people who keep you in business can also put you out of it. Customers passing rubber cheques or using stolen credit cards, returning goods they haven't purchased from you, or claiming to have suffered an injury on your premises or as a result of the good or service you supplied, are also potential threats to be wary of when thinking about how to protect your company from fraud.


1 The Global Economic Crime Survey, PricewaterhouseCoopers, November 2009

2 Report to the Nations on Occupational Fraud and Abuse, Association of Certified Fraud Examiners, 2010

This article represents the views of the author only and not those of American Express.

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Nigel Bowen

Nigel is a freelance journalist and web content provider. Over the past 15 years he has worked for many of Australia's major print media companies and written for a wide range of newspapers, magazines, trade publications and websites. Nigel most enjoys writing about entrepreneurship, popular culture, politics, social trends and small business.

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