Fraud Risk ManagementThe lion explained that each had particular talents that would lend themselves to such a partnership. The jackal was wily and could trick the quarry into the open; and the Cheetah was swift of foot, so that he could direct the quarry to where the lion lay in wait to complete the kill. After some discussion, the cheetah and the jackal agreed to enter into a partnership with the lion. All went as planned and a wildebeest was killed, but when the cheetah and the jackal tried to share in the kill, the lion challenged them. They stood by, helplessly, and watched the lion devour the entire carcass...
Anon c.800ad The Reality of Fraud in Business• A study conducted by the Association of Certified Fraud Examiners (ACFE) in 2010 found that the typical organization loses 5% of its annual revenue to fraud.• In a 2009 Global Economic Crime Survey, South Africa was found to have the second-worst white-collar crime rate in the world (behind only Russia). • Fraud is now the leading illegal money-spinner in the world, exceeding drug running – AIG SA, June 2009 (Moneyweb) You might be looking at these statistics and be thinking – NOT ME or MY BUSINESS...! ...But you would be wrong. You either have or are currently being defrauded. It may be your suppliers, your customers or even your employees. It may not be material or big stuff (yet)...it could maybe only be ‘skimming’ off the top with your Petty Cash...or giving some customers a ‘preferential discount’ without your knowledge...but it is happening. Reality is that Fraud Sucks! Literally, it sucks the money/profits out of your business if you are not keeping an eye on things. But there are some basic things you can do – we refer to them as building blocks. Our Fraud Risk Management ApproachWe have based our service offerings on a very successful holistic strategy employed by one of the General Electric (GE) business units, namely the Fraud Deterrence Lifecycle...
Their approach is straightforward and simplistic, yet effective. • First prize is
Fraud Prevention.
• The circumstances should then be investigated to ensure effective sanctions & redress • The control breakdowns (root causes) should then be corrected to ensure the same gaps cannot be re-exploited Organizations are implementing tighter controls and the auditing profession has adopted more rigorous auditing standards and procedures, but it seems that these efforts are not sufficient to mitigate the fraud problem. One of the reasons for this is that many accountants and auditors think that ‘internal controls’ and ‘fraud prevention’ are the same thing yet this is not the case. Organisations with controls still have fraud – they therefore need to know more about ‘fraud prevention’ and should be thinking in terms of ‘deterring’ fraud. Deterrence is the combined effort of preventative, detective, investigative & corrective measures that work together to mitigate fraud. According to the ACFE, however, Prevention is 80% of the solution. Prevention and deterrence is therefore the approach Exactech focuses on when advising proactive clients who are wanting to implement anti-fraud programs. There are, of course, those organisations that say 'it won't happen to us' and they get defrauded to their shock and horror. Then again there are the few frauds that could not be prevented and the organisation suffers a loss. When this happens you need a fraud response plan and need to decide on how to pursue the fraud investigation.
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