Global Fraud is on the Rise

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Global fraud is on the rise, and new statistics present a scary realization for small businesses around the world. The 2016 Global Fraud Study (GFS) released by the ACFE, was an analysis of occupational fraud occurrences over approximately a 2-year time frame from 2014-2015. The GFS states that small businesses with less than 100 employees suffered the same median loss due to fraud as large companies with more than 10,000 employees. To clarify, this means that the average amount lost was relatively similar between any size organization, but the percentage of revenues lost was consequently much different. With that said, small businesses are suffering a tremendous amount from a lack of internal controls leading to various types of financial misconduct.

The executive summary in the GFS presents various statistics that are somewhat breathtaking in many ways, but should also give some direction on what questions to ask and actions to take moving forward. Whether or not the business is a financial institution, manufacturing company, professional service organization, retail store, or school, there are proactive measures to implement that will minimize risk. Approximately 80% of the companies in the GFS had a code of conduct formally in place when the fraud occurred. This statistic should be a demonstration of how it is virtually impossible to eliminate fraud, however it is proven and very possible to minimize the risk with proper help and guidance.

From my perspective, the most important action an organization can take when starting or adjusting a compliance program, is to simply create awareness around the fact that they are taking action. The corporate culture of an organization is like the foundation of a home; without a sound, solid, and deep rooted base it will not be around for very long. Further, the most common mistake that companies make is having a code of conduct and compliance program developed only to send out a mass email to their employees with an attached 50+ page pdf. Companies need to ensure that employees understand the material, acknowledge the seriousness of an offense, understand the consequences, and witness program follow-through on a regular basis. With employee tips remaining the most common fraud detection method by an overwhelming amount, it is important for employees to feel protected and prepared if something is brought to light.

I encourage businesses of all sizes to lean on their attorneys, consultants, and accountants to put a risk minimization plan in place, as schemes are evolving on a daily basis. This second layer of protection and confidence will enable a team to remain focused on what matters most. It is imperative that companies do not discredit the need for a proactive compliance plan based on the size and structure of the business. An effective plan allows a team to react efficiently when a problem arises so that they can remain controlled and in the driver’s seat.

Our team is introduced to businesses on a regular basis that have questions about the integrity of their accounts. This line of work does not provide much room for speculation, but our experience, track record, and trend knowledge surrounding financial misconduct allows us to react in a clear, seamless fashion.

Please give us a call if you have any questions about how we can provide value to your team, your business, and your financial sustainability, 612.455.4555.