5 Key Components of a Fraud Risk Management Policy

By Brad Moody,

compliance

All organizations are vulnerable to occupational fraud, and that fraud costs an enormous amount of money ($652 billion a year in the US according to ACFE research as summarized in this occupational fraud infographic).  As a result, a comprehensive fraud risk management policy is an essential component of an overarching enterprise risk management plan.

Your fraud risk management policy stems from the risk analysis that must underlie the policy.  That is, identifying the concrete organization-specific fraud risks that must be mitigated.

Systematic planning and implementation across these five basic areas will put your fraud risk management program on the path to success.

1. Identify a “risk owner” in your organization.

Upper management must be engaged in policies aimed to mitigate risk.  Part of this is that responsibility has to be clear – wishful groupthink won’t cut it.  With respect to fraud risks in particular, a member of upper management should be charged to organize and carry out the risk analysis, including how identified risks should be managed.  As with every important management function, this function will include process definition, goal setting, measurement, and reporting on a timely basis. … Continue reading

Fraud Awareness Week Casts Spotlight on White-Collar Crime

By Lowers & Associates,

fraud awareness week

Lowers Risk Group Joins Ranks of Supporters for Nov. 3-9 Awareness Campaign

Organizations lose an estimated 5 percent of their annual revenues to fraud, according to a 2012 study by the Association of Certified Fraud Examiners (ACFE). To help shine a spotlight on this global problem, we are participating in International Fraud Awareness Week, Nov. 3-9, 2013, as an official supporter to promote anti-fraud awareness and prevention.

During Fraud Week, we will share articles and resources designed to help you understand best practices of fraud prevention and fraud risk management. Check back here often and be sure to follow us on Twitter, LinkedIn and Google+.

In its 2012 Report to the Nations on Occupational Fraud and Abuse, the ACFE found that:

  • Fraud schemes are extremely costly. The median loss caused by the occupational fraud cases in the ACFE study was $140,000. More than one-fifth of the frauds involved losses of at least $1 million.
  • Schemes can continue for months or even years before they are detected. The frauds in the study lasted a median of 18 months before being caught.
  • Occupational fraud is a global problem. Though some findings differ slightly from region to region, most of the trends in fraud schemes, perpetrator characteristics, and anti-fraud controls are similar regardless of where the fraud occurred.
  • Small businesses are especially vulnerable to occupational fraud. These organizations are typically lacking in anti-fraud controls compared to their larger counterparts, which makes them particularly vulnerable to fraud.
  • Tips are key in detecting fraud. Occupational frauds are much more likely to be detected by tip than by any other means. This finding reinforces the need for promoting awareness to foster an informed workforce.

For more information about increasing awareness and reducing the risk of fraud during International Fraud Awareness Week, visit FraudWeek.com.

About the Association of Certified Fraud Examiners

Founded in 1988, the ACFE is celebrating its 25th anniversary as the world’s largest anti-fraud organization and premier provider of anti-fraud training and education. Together with more than 65,000 members, the ACFE is reducing business fraud worldwide and inspiring public confidence in the integrity and objectivity within the profession. For more information, visit ACFE.com.

Managing Reputational Risk within an ERM Framework

By Lowers & Associates,

avoidable risk

A comprehensive Enterprise Risk Management (ERM) strategy can help protect your reputation by preventing events that damage it.

Reputation is an intangible asset. Much research and many seasoned observers agree that a good reputation enhances customer loyalty and purchase behavior, market value of the business, hiring and retention success, and brand image. Many of these factors are reflected in the asset we call “goodwill.”

Managing Reputational Risk in ERM

Reputational risk (or ‘reputation risk’) is one of the costs of events such as adverse actions for negligent hiring or publicized high-level fraud. Events like these are precisely the types of risky outcomes that your systematic ERM strategy aims to identify, evaluate, and mitigate. We do not have space to provide an exhaustive list of reputational risks, but we can illustrate the point that preventing selected negative outcomes can help protect your reputation, not to mention your bottom line.

… Continue reading

  Category: Risk Management
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5 Critical Areas of Human Capital Risk [Infographic]

By Lowers & Associates,

Human Capital Risk Infographic

“Almost everything that can go wrong in a business has a human capital component.” This quote from David Creelman of Creelman Research points out the critical importance of managing human capital risks. Often, risks associated with human actions are given only cursory attention until “something bad happens”. Unfortunately, when one of these risks contributes to a loss, it can be very costly in terms of brand, reputation, morale, or revenue.

Human capital risks commonly stem from these five critical areas:

  1. Complacency
  2. Turnover
  3. Occupational fraud
  4. Catastrophic workplace events
  5. Negligent hiring or retention

This latest infographic summarizes each area and offers tips to help organizations better manage their human capital risks.

human capital risk infographic

The Hidden Risks of Occupational Fraud [Infographic]

By Lowers & Associates,

Your organization is at higher risk for occupational fraud than you might think. U.S. organizations lose more than $652 billion annually to fraud perpetrated by an employee, often a manager or executive. Victims include private or public companies, not-for-profits, governmental agencies, and any other kind of organization where managers and employees have access to financial or material assets.

One of the most challenging aspects of occupational fraud is that the perpetrators are usually people who have no prior criminal record. Well-run organizations use background checks to minimize risk in hiring, and prior infractions are generally grounds for refusing to hire a person. Yet people with previously clean histories who have earned trust in their positions may abuse that trust, using their privileged access to steal. … Continue reading