We listen and see headlines news of major companies being beaten by fraud every day. Fraud in companies has now become a common problem in any kind of business. Whether the business is a small firm or a money giant, research states that your company loses at least 5% of the total revenue each year. Now think this figure for money giant organizations, you will see they lose about $3.7 trillion in just one year. With these results, it has become even more crucial for any business to reduce the risks of fraud.
Organizations are now prompted to find a fraud management system to reduce the loss they bear every year. No business is vulnerable to the fraud these days, and ignoring this fact can put your company to a great loss. It is important for any business to define strategies to reduce the risk and stay strong in the market. One of the most common cases for fraud is the employees. Many large businesses have been suffered from the employee's fraud, which has cost them millions of dollars. Even if you avoided the fact of employees' dedication and provided a working environment, there are still many facts that strap to the frauds. With that, let's discuss five ways businesses can reduce the risks of fraud.
1. Know Your Customers
With the worst effects of employee fraud, customer fraud schemes are no exception. It is important to verify the suitability of customers you are dealing with. Organizations related to banks, credit unions, and other bulk customers companies follow special procedures to ensure that customer is ready for business. KYC solution datazoo, however, verifies the customer identity and the transaction process to detect and prevent any fraud scheme on your end. KYC strategy has been the most valuable practice to identify the legitimacy of any transaction.
KYC helps in reducing the factors of frauds like money laundering, illegal shares, transferring money to the terrorist groups, etc. Additionally, they work in cooperation with the anti-money laundering organization to stay protected in case any illegal transaction is performed.
2. Know Your Employees
Speaking of history, employees have always been the top cause of fraud in many businesses. Fraud detectors may often work for outside organizational transactions or customer fraud, but sometimes it becomes difficult to tackle employee fraud. It is always recommended to keep an eye on their activities. Ask them about suggestions to the working policies and offer them bonuses yearly. The main purpose of these is to keep earning their trust and stay vigilante of the frauds. Although any kind of attitude change is the reason, that something has gone wrong. Increasing the work pressure on employees can lead to the worst fraud schemes, which later can put you in huge liability.
It does not matter when the fraud will happen, but it is important to avoid the time when it becomes obvious to happen. To avoid this factor, companies place fraud detection programs to detect any anomalous activity conducted among employees. Moreover, companies should always be keen-eyed on the activities of employees and earn their trust with communication.
3. Implement A Clear Code Of Ethics
Implementing a clear code of ethics is also a prestigious practice to reduce employee fraud in an organization. Making a written code of ethics allows your employees to conduct business activities professionally and honestly. It is also recommended that you write this document clearly, so it stays understandable for the employee. Thinking as the employee's perspective allows you to become aware of their needs and demands from the company.
Not only that, these written codes of ethics documents must always be in reach of employees so they can easily access them. Giving your employees complete access to the code of ethics allows them to get the grips of the working environment to stay honest with the company. Mentioning the ethical challenges on the document allows your employees to put their potential efforts in their work without the factor of picking the road of fraud.
4. Find Low Living Employees
Most businesses encounter frauds from the employees that are living a hard life and a stereotypical environment. These employees are going through a lot and living hand to mouth to cover the expenses. The ACFE report of 2016 explains that more than 90% of the employees in business join the fraudulent road and make changes to the documents. They try to conceal these changes in invoices and transaction documents and immediately get detected by fraud proprietor programs.
These con men won't look like the red riders, but they will be the normal regular guys, who slowly and secretly change the invoices. Moreover, they will think that changing the documents will result in the rise and shine of their future.
5. Get Reporting System
Deploying a reporting or hotline system for your business ensures that your business stays out of the fraudsters. Enabling employees to reach the higher authorities can increase their honesty with the workplace. Moreover, encouraging and comforting employees to report any odd activity in the workplace can reduce fraud factors prominently.
Conclusion
The bottom line is detecting fraud in a business is a hard job, but finding the right practices makes it easier to mitigate the aftermath. You can also use data analytics to detect fraudulent activities by monitoring the employee’s transactions and emails. It does not even break their data privacy. However, mentioning these policies in the code of ethics allows them to be aware of the harsh effects of fraud.
