A recent case has highlighted the need for companies to put strategies in place to protect their businesses from internal fraud.
A recent case has highlighted the need for companies to put strategies in place to protect their businesses from internal fraud.
A former company director pleaded guilty to 14 counts of fraud in the Brisbane District Court last month, after being prosecuted by the Australian Securities and Investments Commission. David Downey appeared in court after being extradited from New South Wales in December last year, and has been held in custody after failing to appear in May 2012.
Reports have shown that employees facing difficult financial times can come under increased pressure to commit fraud. This can have significant consequences for an organisation. Among the risks are:
- reduced profits
- business disruption
- negative workplace culture
- damage to reputation
- unwanted media attention
Everybody in an organisation can help to reduce fraud – but having a risk management strategy in place can be especially helpful. To reduce the risk, companies can:
- put policies in place which define fraud
- put policies in place to detect fraud
- regularly review fraud-related policies
- insure against losses resulting from fraud
Employees are especially well-placed to detect fraud, and should feel empowered to do so. It is especially important that they feel they can report any suspicions they have without fear of retribution.
A recent report from PricewaterhouseCoopers suggests that the financial services industry is especially vulnerable to fraud, and that fraud committed by those in senior management positions within the industry has increased in recent years.
The report shows that fraud risk assessments are effective in helping companies to detect fraud. “We have seen a correlation between the frequency of fraud risk assessments and the extent of reported frauds across all industries,” the report stated. “This indicates that organisations which perform FRAs at least once or more a year are able to detect more frauds and therefore report more economic crime.”
