BPM Analytics
The strategic importance of fraud management for CEOs and CFOs
Scams and fraudulent activities are an increasingly common occurrence in today’s times, with attackers leveraging modern digital technology to steal from businesses. Attacks may be external or from within the organisation, and the loss of revenue isn’t the only concern for CFOs and CEOs.
Besides causing financial instability, a fraudulent attack can also damage a business’s reputation, erode trust with customers and stakeholders, demoralise employees, and alienate customers. While a CFO shoulders the responsibility of preventing and mitigating such attacks, they must also be careful about hefty fines for failure to comply with regulations, consequent lawsuits, and legal fees. These issues lead to long-term negative effects for the organisation, and it can be extremely difficult to recover. This blog will explore popular fraud management strategies that CFOs and CEOs can employ to protect businesses and their resources.
Recognising potential risks
Before a business can craft effective fraud risk management strategies, it is necessary first to identify vulnerabilities and potential risks. Threats and attacks can be external or from within the organisation. We will shed light on some of the most common avenues of attack. Knowing how your organisation is most likely to be compromised is the first step towards putting appropriate fraud management solutions into operation.
Spear phishing attacks
Weak user authentication protocols and login credentials can make businesses easy targets for spear phishing attacks. Attackers can use this method to gain access to a business’s financial systems.
Data breaches due to security shortcomings
It is impossible to neglect that attacks can come from inside the organisation as well. Storing sensitive data unsecured on-site opens the door to attacks from within. Employees may be tempted to compromise this data for their own gain.
Business Email Compromise (BEC)
BEC is a specific type of spear fishing where fraudsters impersonate upper management, commonly the CEOs, over email in an effort to trick employees into making large funds transfers to unauthorised bank accounts.
Unauthorised banking access
If the upper management fails to monitor employees who are bank account signatories, they might still hold authority over company bank accounts after leaving the organisation. This leaves them free to commit embezzlement.
Trading fraud
Settlement instructions can be manipulated to divert funds to unauthorised bank accounts. Employees may also engage in unethical trading practices for personal gain, resulting in suboptimal financial decisions.
Strategies for corporate fraud management
CFOs that lay a strong foundation for effective risk management measures and strategies successfully protect businesses from financial losses, reputational damage, and legal consequences of fraudulent activities. Here are some strategies that will strengthen the roots of corporate fraud risk management.
Incorporate modern anti-fraud technology
Businesses should adopt contemporary fraud prevention measures such as digital fraud detection solutions, cybersecurity tools, artificial intelligence, machine learning, and advanced analytics to protect themselves. Such fraud risk management solutions can analyse patterns in large amounts of data and flag discrepancies that may indicate suspicious financial transactions or suspicious behaviour among employees. Such solutions can also highlight vulnerabilities within the financial system that may need to be reviewed or monitored.
Conduct periodic risk assessments
Given the high risk of breaches that financial processes face, regular risk assessments are vital. These assessments should also evaluate the potential risks associated with suppliers, partners, employees, customers, and other stakeholders. Risk assessments can highlight inconsistencies in financial reporting, data privacy, and cybersecurity measures and respond to evolving threats before any serious damage is done.
Build an ethical work culture
Nurturing an ethical culture within the workplace is crucial to preventing fraud. Conducting regular training sessions on ethical practices, fraud prevention, and regulatory compliance is indispensable for any growing organisation. These sessions ensure that the workforce is educated about the importance of staying vigilant and aware of fraud risks. Employees should also be encouraged to report any suspicious activity that they observe around the workplace and have the option to do so anonymously.
Stay updated with regulatory changes
It is essential that organisations establish controls to stay compliant with changing fraud prevention standards and regulations to prevent an unintentional lapse that could result in fines and other legal complications down the road. CEOs and CFOs must revise policies accordingly and ensure that all regulatory updates are communicated to the workforce through timely training sessions. Spreading awareness across the organisation will ensure compliance with financial reporting, cybersecurity, and fraud prevention laws.
Stay informed about emerging threats
The prevalence and growing use of modern digital tools not only help businesses grow and stay competitive but also give scammers the opportunity to exploit this technology to compromise honest businesses. This is apparent in the wide variety of digital scams and cyber attacks regularly making news.
Industry groups, law enforcement, and social media can help organisations stay updated on emerging fraud risks and work as an early warning system for the latest trends in cybercrime. Being aware and informed equips security teams to update and adjust fraud risk management strategies to meet developing challenges head-on and mitigate risk.
How can Infosys BPM help with fraud risk management?
Infosys BPM offers a comprehensive suite of fraud detection and prevention solutions that employ cutting-edge technologies for e-commerce, telecom, and banking businesses of all sizes to manage and mitigate fraud risks. Explore how contemporary fraud management solutions can protect your organisation.
