Managing Fraud Risk: A Practical Guide for Directors and Managers

The Deterrence Factor

Overview – What is Meant by Deterrence

Deterrence measures provide some of the most powerful yet least well used techniques for managing fraud risk. Set out below are a number of key ideas, putting the framework for deterrence in its proper context, before we look at the various options available to directors and managers in this area. These should be very attractive options because they are generally low cost actions that can deliver impressive results by reducing the fraud threats significantly.

According to the Oxford English Dictionary, the verb “deter” means to “discourage or prevent (a person) through fear or dislike of the consequences”. Each of us will be aware of deterrence mechanisms in our everyday lives, often to do with aspects of policing and law enforcement. For example, anyone who drives a car is likely to be familiar with the device known as the speed enforcement camera (“speed camera”) which is used to monitor compliance with speed limits. In the UK, where I do most of my own driving, this has had a noticeable effect. The first such systems were introduced in the 1960s but, certainly from the late 1990s onwards, with the introduction of digital cameras, speed cameras have been a significant and controversial feature of the road network in the UK. Rather than getting involved in the controversy, consider a very simple example of the impact of speed cameras on driving patterns on motorways in the UK. Here the speed limit is 70 miles per hour. ...