Human Capital Risk Series: Fraud in the Workplace

By Lowers & Associates,

In the 2016 update to the invaluable Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) analyzed 2,410 cases of occupational fraud that cost more than $6.3 billion in losses. Extrapolate this to the total number of organizations at risk and you can understand why ACFE has found in report after report that about 5% of top line revenue is lost to fraud every year, worldwide (download the ACFE The Staggering Cost of Fraud PDF).

Unlike the human capital risks of complacency or turnover, occupational fraud is an intentional act to steal from the organization. It involves a conscious attempt by someone within or linked to the organization to seek “personal enrichment through the deliberate misuse of misapplication of the employing organization’s resources or assets” (ACFE).

Needless to say, fraudsters have every incentive to remain hidden, so a well-executed fraud can go on for years. The intentional, hidden nature of fraud puts the emphasis in risk management on identifying potential fraudsters (preferably before you hire them) and limiting and monitoring the opportunities for fraud.

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Why Fraud Prevention Really Matters

By Mark Lowers,

Despite the wealth of well-publicized information about the high prevalence of organizational fraud and the high costs of fraud, it is always surprising to learn that so many companies operate without systematic fraud prevention programs, or fail to review their programs on a regular basis.

In fact, there are very important reasons fraud prevention is worth the effort. Here are some of them: … Continue reading

How Are You Handling This Year’s Emerging Risks?

By Mark Lowers,

cyber crime fraud

The Edward Snowden case and the theft of Target customer data have both driven home the point that cybersecurity is an emerging, and rising, risk issue for both companies and political entities. But there are other risks that emerge as rapidly-changing multi-market regulatory and business interactions redefine the landscape.

Every year business consultant CEB (Corporate Executive Board) issues a list of emerging risks that sharp companies need to address to stay ahead of the game. This year they recommend managers pay special attention to these 10 specific risks: … Continue reading

Lessons in Occupational Fraud and Fraud Prevention

By Mark Lowers,

Occupational fraud is a huge drain on organizations’ resources, costing an estimated global loss of $3.7 trillion dollars annually. And according to the Association of Certified Fraud Examiner’s (ACFE) 2014 study, just 14% of defrauded organizations are able to fully recover their losses.

Fraud is a very real threat to the bottom line of almost every organization in our economy. But it can be prevented, or at least mitigated.

There are 3 steps in setting up a fraud prevention program in your organization:

  1. Understand what fraud is and how it is likely to emerge.
  2. Identify potential sources of fraud in your organizations.
  3. Take steps to prevent fraud through processes or controls.

Ultimately, a healthy anti-fraud corporate culture that permeates from the top down will make your organization more crime resistant. This will take time to nurture, and it will take continuous effort to sustain, but in the end you can make occupational fraud an extinct disease in your workplace.

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ACFE Highlights the Biggest Fraud Challenge in 2014

By Mark Lowers,

cyber crime fraud

What do NSA and Target Corporation have in common? They both have enormous databases of sensitive information about individuals that have been penetrated by the likes of Snowden, Wikileaks, and worse criminal conspiracies. According to James D. Ratley, President and CEO of the Association of Certified Fraud Examiners, cybercrime is one of the biggest emerging fraud threats in 2014.

Ratley mentions hacking schemes like the one that shocked Target, as well as other malicious activities like malware and phishing schemes. He rightly says that these schemes can be foisted on individuals, small or large businesses, or any type of organization.

But we think there is a very good reason why cybercrime could be the biggest emerging fraud threat for years to come. It is rooted in the fact that organizations will not forego the tremendous power of networked computers and huge databases, and these are rapidly evolving. Every innovation in automated business processes creates new opportunities for hackers. The prize at stake is huge. … Continue reading