You’ve seen the data before: Organizational fraud is a huge annual cost. Managers want to reduce the costs, so the real questions are to learn why fraud occurs and what to do about it.
The most compelling explanation for organizational fraud is the Fraud Triangle, as summarized in our recent infographic. Frauds occur when there is opportunity, one or more employees are under perceived financial pressure (incentives exist), and they can rationalize their fraudulent behavior. These 3 factors correspond to the legs of the triangle.
Control the Opportunities to Reduce the Chances of Fraud
In our experience, organizations can reduce the probability of organizational fraud by just removing one of those legs of the triangle. There are things you can’t control, such as employees’ spending habits, but if you remove the opportunity for employees to get their hands on an asset without the potential of getting caught, then you’ve reduced that probability by 50 percent. … Continue reading