Today there is far less tolerance of fraud or misconduct in whatsoever form it takes. There is an augmented expectation from regulators, shareholders and the market that suspicions / instances of fraud or misconduct will be investigated successfully and on a real time basis and that any perpetrators will be dealt with fittingly.
A study by KPMG on bifurcation of fraud industry wise, shows that 50% of the total frauds are arising out of financial industry
Elements of Fraud Risk
There are four general elements under common law, which all must be present for a fraud to exist:
Misrepresentation of a material fact.
Made knowingly and with intent to defraud.
Reliance on the misrepresentation by the victim.
Resulting in injury from such reliance.
These elements comes into force in the kind of environment we as a financers work in, and some Part of the risk involves being sure of whom you are dealing with,
Internal Customers ( those we assign to run our business, like managers or Channel)
External Entity ( With whom we do business, like our customers )
Across organizations it has been observed that
Employees and executives who feel unfairly treated sometimes believe they can commit occupational fraud and abuse workplace conditions are therefore a major risk factor in predicting fraud.
Those faced with embarrassing financial difficulties pose a significant problem. The simple moral is to pay attention to what goes on outside the books, too.
So while we are looking at the numbers keep an eye and both ears open for disgruntled personnel’s. It may mean all the difference in detecting fraud.
Reasons for Fraud Risk
Management’s across the world has started implementing processes for identifying and investigating early signs of fraud. Sources that will assist in identifying alleged fraud and misdemeanors will include:
Whistleblowers
Internal controls
External auditors
Some argue that internal controls are simply not enough to deter fraud. They cite two reasons:
Controls are supposed to provide only reasonable assurance.
There are few controls that cannot be overridden or circumvented by people with sufficient motivation.
This point itself makes it all the more a reason for all to be vigilant and encourage Whistle blowing, as Employees acknowledge fraud as a realism of corporate life, and they come across it every day. It becomes their role to bring it out to fore. Hence making the Organization a Fraud Risk free One.
As we emphasize that Fraud Risk is every ones business.
