It can be a shock to realize that many businesses will lose time and money to fraud at some point. Especially when many companies don’t give fraud prevention much thought at all — perhaps until it’s too late.
It’s easy to see how handling fraud doesn’t seem critical — until the awareness creeps in that something’s gone wrong. Rather than this reactive stance, it’s helpful to see fraud prevention as an essential investment in future-proofing your business.
We’ll never be able to prevent all fraud from happening. After all, it’s been around for over twenty centuries, and it continues to evolve and keep up with changing technologies. We can, however, put systems in place to detect and prevent fraud and train our people to be effective in the fight against it.
Sometimes we may be able to reverse a payment that shouldn’t have been processed or restore bank details that were changed with malicious intent. But sometimes, the damage is done and can’t be reversed. Or, at the very least, these situations disrupt business processes, and, in many cases, money, assets, or critical data is gone for good.
Dealing with internal fraud
When people discover fraud perpetrated against their business, they’re often stunned and in disbelief. ‘I can’t believe this happened to us!” A whirlwind of emotions like anger, sadness, and betrayal can follow.
Once things have settled down a bit, the next thought is often, “How can we stop this from happening again?”
The thing is, employees who commit fraud at work are often highly familiar with business processes and systems. These people are experts in their roles; they know how things work and how to exploit system weaknesses.
Proactive fraud investigation includes analyzing the circumstances leading up to the fraud, how it unfolded, and how to prevent future similar attempts. Policies and procedures that allow early detection of fraud attempts put organizations in the best position to deal with them effectively. Being able to identify and report potential cases of fraud as they occur allows teams to minimize the impact it has on the business.
Being prepared to prevent and deal with fraud requires planning. Systems must be in place to help detect and reduce the risk of fraud. The data points will differ for every situation, but thoughtful planning improves your business resilience and minimizes financial damages.
Being prepared for external fraud attempts
With external fraud, professional fraudsters are no slouches at doing their homework on potential targets. They scour the internet and social media to find as much information as possible about their targets to make their back stories highly credible.
Sometimes fraudsters attempt a particular scam on many businesses in one specific industry simultaneously. Clusters of attacks can happen because fraudsters have uncovered a loophole in a typical business workflow or that there’s a standard set of tools used in that industry that lack stringent checks and balances.
The risk of employees inadvertently exposing sensitive company information on social media is a genuine concern. Cyber fraudsters can use information gathered from social media to identify key staff members. Understanding a company’s internal workings puts fraudsters in a better position to craft plausible covers for fraud attempts. We’ve covered these risks in a previous Security Awareness blog post on social media cyber risks and explained why this is an area that’s worth your attention.
Factors of risk
Ideally, your organization is prepared and has checks and balances in place to protect against fraud attempts. Fraud doesn’t discriminate, so this is important whatever size your business is.
If your organization does any of the following (common) things in your day-to-day operations, there’s potential for fraud risk:
- Issuing invoices to receive payments
- Using direct bank transfers
- Having an inventory of stock or office assets
- Working for tenders in a competitive market
- Handling cash-based sales
- Using widely available software platforms
- Providing staff access to SaaS applications.
Though there’s no off-the-shelf product that can protect you from all kinds of fraud, you can implement processes and practices throughout your organization to help identify, prevent, and protect against it.
Putting fraud protection in place
Each fraud risk comes with its own set of potential solutions. Applying some basic good practice security principles can help organizations protect themselves more effectively.
These principles include:
- Identifying and documenting potential red flags and warning signals
- Building repeatable processes to handle possible fraud attempts
- Establishing checks and balances between role responsibilities
- Assigning a fraud risk role or seeking third-party specialist assistance
- Training your team about fraud risks and prevention procedures.
The effects of fraud
The ultimate goal is to prevent fraudulent actions from occurring. We also need to learn from thwarted fraud attempts. When fraud happens, we need to learn from it and ensure we support the people most affected by it.
Fraud can have a variety of negative impacts on your business. The financial impact of fraud is a hit that no company wants. But the full extent of fraud can be more far-reaching. Negative press or word-of-mouth can result in reputational damage to your business. The turmoil and chaos of fraud can take an emotional toll on your employees. It’s also draining — in terms of time, resources, and emotionally — to investigate, recover and mitigate future attempts.
The impact of fraud can extend further than your organization. Your customers, clients, and suppliers aren’t immune to the harmful fallout. In cases involving legal proceedings, lengthy prosecutions can drag on for years and increase the financial and emotional strains of the incident.
These are just some reasons why it’s necessary to protect your business, your people, and your processes from fraud. And one of the first steps your organization can take toward preventing fraud is to train your employees on how to identify red flags and stop attempts in their tracks.
Getting your team onboard with fraud prevention
Our organizations depend on the people in their teams to behave ethically. Fraud prevention can only be effective if everyone working in an organization is vigilant in preventing, detecting, and reporting fraudulent behavior.
In our course, Fraud Prevention, we cover some of the different types of fraud and how they affect everyone in a team. Educating people about the warning signs that could indicate fraud puts them in a better position to report suspicious behavior early. Training is a proactive approach to protecting your organization.
The underlying message in our latest Security Awareness course is this: Fraud prevention is a team effort — everyone can assist in preventing, detecting, and reporting fraud.
We cover some general guidelines to get your team thinking proactively about preventing fraud. This course contains practical points to help employees as they go about:
- Setting up or following established policies or processes to prevent fraud
- Creating systems that can detect fraud, and
- Knowing how to report fraud when it’s suspected.
Help your people build their cyber security superpowers
SafeStack’s Security Awareness training can help your team become more prepared to deal with potential cyber security attacks and better understand your business’s security risks.
While this course is only available to Team and Enterprise subscribers, we offer essential Security Awareness courses on our Free plan.
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Find out about our stress-free cyber security and privacy education for smaller teams. Sign up today and let SafeStack help your organization stay safe online.
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