Pennsylvania businesses are required to maintain accurate financial records, including income, expenses, assets, liabilities, and equity. A company with an online existence probably has, at some time in its history, experienced fraud or possible fraud.
To put it simply, fraud risk management is the process that involves recognizing possible fraud risks within your company and then implementing an anti-fraud program to prevent any fraudulent conduct before it happens. It consists of identifying both inherent and possible fraud risks while developing a program that tries to identify and deter suspected fraud, both from within and outside of the business. Contact a CPA in Scranton, Pennsylvania, if your company often runs into fraudulent transaction cases.
Ways to minimize the dangers involved in high-risk transactions
Worldwide, businesses are estimated to lose 5% of their total income on average as a result of fraud. Furthermore, a recent study revealed that the fraud business is growing at greater speed.
This fraud loss % statistic is essential because financial resources have become more limited than ever. Fraud loss has a chance to soak into an organization’s culture if it is not handled. Fraud can propagate like a virus and destroy businesses, leading to ever-increasing losses in the absence of a fraud risk management plan.
- Fraud risk assessment
Recognizing the weaknesses in your company is the first step toward preventing fraud. You can look at the risks that your business encounters by doing a comprehensive risk assessment, taking into consideration its particular complexity, size, products, and market exposure. Risk assessment examines all forms of risk, their probability of occurring, and the corresponding expenses.
- Fraud risk governance
After an internal auditor and any additional relevant team members have assessed the risk, fraud management has to be entrenched in your organization’s culture. Adopting new protocols and realizing the seriousness of fraud risk are necessities for stakeholders.
- Fraud risk prevention
Using fraud detection tools to stop fraud at the initial onboarding step is one of today’s finest fraud risk prevention tactics. This fraud risk prevention technique may also be implemented when a new employee or vendor enters your company’s onboarding process or when a customer approaches you to open an account.
- Fraud risk detection
Controls are tools for alerting staff members about potential fraud. They may be set up in a variety of organizational situations, from internal communication programs to network arrangements.
One of the primary elements of fraud detection is reports. When applied correctly, they can identify abnormalities and fraudulent activity.
- Monitoring & reporting
The method of managing fraud risk is constantly evolving. The first four principles need to be continuously observed and reported. A fraud management system can only be successful if it is regularly assessed for its achievements, weaknesses, and possible opportunities for improvement.
