What do you think are the best strategies to prevent fraud in business? Why so?
As a matter of fact, employee fraud is believed to be a crucial issue that organizations should deal with. Although the executives of the company want to believe that the workers are loyal and aim to accomplish the objectives of the company and reach not only personal success but also the prosperity of the corporation, some of the employees have personal interests. The Nation on Occupational Fraud and Abuse provided a report that states that almost 5% of losses that a company is facing each year is because of employee fraud (Biegelman, 2013).
Prevention approaches and strategies are essential for implementation in order to reduce the index of losses because of fraud. There are several strategies that are directed to the prevention of fraud and should be discussed; among them are the following ones, namely:
- Know the workers;
- Create a reporting system;
- Internal control;
- Monitor the balance;
- Hiring of experts;
- Corporate culture (Biegelman & Bartow, 2012).
The first tactic involves listening to the employees and be attentive during discussions because, during conversations, the potential risk for committing fraud can be identified. It is significantly important for the managers to communicate with the staff and understand them better. Certain changes in attitude towards the working process or the employer can be a signal for committing potential fraud. An employee can view fraud as a tool for revenge.
The reporting system is beneficial for fraud prevention. The working staff should be aware of the fraud policy and the consequences of committing fraud. The understanding that managers control the working process can deter some employees. Honest workers can help to prevent crime, and thus, an anonymous reporting system should be created.
The next strategy is related to the implementation of internal control. Internal control is directed to the deterrence and detection of people who commit fraud. Segregation of duties is a fundamental element for internal control. Documentation is another key point that contributes to the reduction of the fraud index. Internal programs should be revised and improved constantly in order to be effective.
The next element that can contribute to the reduction of fraud is the monitoring of vacation balance. The workers who work without vacations for a long time, for a couple of years, for example, can do it not because they appreciate the company and are loyal, but because they want to hide something and are afraid that their fraud will be noticed when they are not in the office. Rotation of the employees can beneficially influence the situation. The employee who came to the workplace after the process of rotation will detect fraudulent activity.
Certified Fraud Examiners can help to create an effective fraud policy for the company to reduce the index of fraud. Moreover, they can provide consultations and recommendations regarding the system of internal control and forensic analysis. Corporate culture is another factor that contributes to the improvement of the working process and reduces the risk of fraud. The open-door policy is beneficial for direct communication with managers and solving some issues.
Is it feasible for a loss prevention manager to assume all of the duties of a risk manager besides those of loss prevention? Why or why not?
Risk is not always a disadvantage. In order to succeed, the company should experience changes and face risks. However, it is essential to hire professionals that will assess risks and losses. Thus, the significance of the risk manager and prevention loss manager should not be undervalued. The fundamental question is whether it is feasible for a loss prevention manager to assume all of the duties of a risk manager besides those of loss prevention.
In order to get a better understanding of the question, the responsibilities and duties of these two managers should be taken into account. The risk manager should be able to:
- Analyze financial impact the losses have on the company itself, customers, clients, and employees;
- Outline and examine possible solutions and certain cost-effective opportunities;
- Create the insurance budget;
- Make records regarding the:
- Insurance policies;
- Claims;
- Loss experience;
- Control the process of claims and dress them in a fair and respective way (Hopkin, 2010).
However, it should be stressed that risk managers would be ineffective without the help and support of other employees. The working staff should provide the risk managers with needed information for the analysis and determination of potential risks and losses (Lam, 2014).
As a matter of fact, loss prevention managers are supposed to implement appropriate techniques and methods into the working process in order to minimize losses. Loss prevention managers make different plans that are directed to the minimization of costs. The tasks of loss prevention managers are to deal with unsuccessful consequences of risks. The companies take risks hoping for improvement and progress; however, managers realize that there is a possibility to lose.
For example, if a company enters a new market or aims to create a new product that is not linked to their ordinary goods, there is a threat that the company will fail to satisfy the needs of the customer. The company hopes that the product will meet the expectations of the clients. However, the organization takes risks and realizes that there is a chance that goodwill does not enjoy popularity among the customers. The company can lose the resources that it had spent on the production and promotion of a product. In this case, in order to minimize losses, the organization hires professionals, namely prevention loss managers, who can minimize costs and reduce the level of losses.
Thus, a person that is working with negative consequences of risks using personal experience takes into consideration only the negative side of the process, namely losses. Prevention loss managers consider risk and losses as a disadvantage and a threat to business. A person that is working with negative implications of risk will not take unpredictable actions and is unlikely to perceive risk as something beneficial.
A risk manager is working with beneficial sides of risks and understands that risk is not always consequently leads to losses but to new possibilities and opportunities for business development. Thus, the combination of responsibilities and duties of loss prevention manager and risk manager is not effective. The companies that are directed to development should realize that loss prevention managers and risk managers are significant and should not be combined because these professions are considered to be bi-polar. Risk is an integral part of successful business, and people who can take risks are as needed as people who can prevent losses.
References
Biegelman, M. (2013). Faces of fraud: Cases and lessons from a life fighting fraudsters. Hoboken, NJ: Wiley.
Biegelman, M., & Bartow, J. (2012). Executive roadmap to fraud prevention and internal control: Creating a culture of compliance. Hoboken, NJ: Wiley.
Hopkin, P. (2010). Fundamentals of risk management: Understanding, evaluating, and implementing effective risk management. London, UK: Kogan Page.
Lam, J. (2014). Enterprise risk management: From incentives to controls. Hoboken, NJ: Wiley.