Fraud in the UK has increased seven-fold since 2003 and doubled last year, costing the country £2 billion (FraudTrack). Experts predict that it will get worse and that there will be a surge of fraudulent activity in 2012, with internal fraud and cybercrime tipped to be the fastest growing areas.
In spite of the rising statistics, many businesses, particularly in the private sector, are continuing to sweep the subject under the carpet. Leaders are reluctant to proactively talk about or tackle the ‘F’ word, choosing instead to react to fraud after the crisis has occurred and the losses have already been made.
Japanese camera and medical equipment firm, Olympus, is the latest victim of fraud. As a result of accounting fraud, the company has lost $1.7 billion and is currently under investigation with law enforcement agencies in the UK, USA and Japan. The scandal was not uncovered until the company’s former chief executive blew the whistle when he spotted Olympus paid an astronomical fee for advice about an acquisition.
Olympus may be an extreme example but businesses of all sizes often take the ostrich approach, burying their heads in the sand and taking the view ‘we will never be a victim’. The fact is that all businesses can be victims of fraud, including internal fraud, unless they proactively take measures to ensure it doesn’t happen.
If you want to start tackling the growing fraud epidemic, you could start by considering the following:
- When was the last time you checked who has access to payment systems within your organisation?
- How much control do individuals have over the procurement process?
- When did you last examine the audit logs within your finance and payroll systems to see what important data has been amended? (companies can struggle with an annual check let alone a daily or weekly check)
- How many credit notes (and for what values) have you issued recently?
- How many billing write-offs are made and by whom?
The answers to these questions may provide an alarming wake-up call!
So what can you do to help prevent internal fraud within your organisation? First and foremost, you need to have quality fraud detection and prevention technologies in place. There are various software solutions on the market to help businesses to identify and prevent fraudulent activity.
With analysts predicting a ‘tidal suge’ of fraud this year, it’s vital that business leaders learn from examples like Olympus and implement fraud detection and prevention measures to ensure that they too, don’t become victims of the ‘F’ word.