Fraud prevention: myth vs fact

Establishing a modern, tech-enabled fraud prevention system in an organisation can feel like a daunting prospect. Researching providers, setting up the technology, and training employees in what to do takes both time and effort – and the resolve to take an unflinching look at how honesty is supported in the workplace.

But doing so is surely worthwhile. After all, research shows that organisations with an independent reporting system cut fraud losses in half.

Still, myths about how fraud occurs within an organisation persist. Let’s separate fact from fiction. 

MYTH 1: “My business doesn’t need a fraud prevention strategy. We’re too small.” 

THE TRUTH: Fraudsters are opportunistic offenders. They don’t care about the size of a company. Fraud prevention should be a priority for all firms. No matter how big or what industry a corporation is in, fraud can still occur. Businesses of all sizes should have a fraud prevention system in place, including a way for employees to speak up about wrongdoing they encounter in the workplace. 

MYTH 2: “It’s just about selling tech solutions.”

THE TRUTH: Although ethical reporting technology does play a significant role in preventing fraud, it’s not the only preventative measure to consider. Organisations need to take a ‘top down’ approach to creating a workplace free of harassment and misconduct. A code of conduct is a good place to start, but staff training, open channels of communication – as well as a robust technology solution for supporting whistleblowers when they speak up – all play a part. 

MYTH 3: “There’s no business case for it.” 

THE TRUTH: Organisations with an independent reporting system cut fraud losses in half. According to research by ACFE, 42% of frauds were detected by tip off, with more than half of all tip offs coming from employees. Similarly, organisations with hotlines detect fraud more quickly and have lower losses than organisations without hotlines. 

MYTH 4: “We’ve never detected fraud before. We’re probably fine.” 

THE TRUTH: When it comes to ethical reporting, no news is definitely not good news. ACFE estimates that organisations lose about 5% percent of revenue every year to fraud. The average loss per case? A whopping NZ$2,800,000. Protecting your reputation and brand is another aspect of fraud protection. Fraud-related incidents can harm your business’ reputation and make it more difficult to attract new clients. Ethical reporting systems help organisations protect their revenue – and their reputation. 

MYTH 5: “Our compliance team will handle it.”

THE TRUTH: False. Fraud prevention is an organisation-wide endeavour, starting at the top. It is everyone’s duty to prevent fraud. Every employee should receive training on how to recognise – and report – unethical behaviour in the workplace.  

MYTH 6: “Fraud prevention education is enough.”

THE TRUTH: Myriad other factors have an impact on whether fraudulent activity is detected in a business: ‘tone from the top’, a code of conduct, and whistleblowing software, and telephone hotlines all play a vital role in keeping workplaces free from fraud and unethical behaviour. 

MYTH 7: “Fraud prevention education trains staff to commit fraud.”

THE TRUTH: The opposite is actually the case. Fraud awareness education and training – along with the right tools to support whistleblowing in the workplace – lowers the perceived opportunities for an organisation’s members to commit fraud. Knowing that colleagues have been trained to speak up if they encounter wrongdoing, knowing they have tools to do so – and that they will be supported by management if they do speak up – is a powerful dissuader for those considering fraudulent behaviour. 

There’s no one solution that will work for every organisation, of every size, in every industry to prevent fraud before it occurs. However, there are common steps that every business can take to protect itself against internal and external fraud: staff training, engagement from management, an open-door policy, a multi-channel reporting platform and a culture that embraces honesty and openness all play a part in an organisation’s fraud prevention strategy.   

To learn more about Report It Now and the customised ethical training service we can provide for your business, contact us for a free, confidential assessment. 

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