Managing Fraud Risk: A Practical Guide for Directors and Managers

Fraud: The Gorilla in the Room?

When I talk to clients or to delegates on my courses, the great majority have no difficulty in agreeing with the proposition, when prompted, that fraud risk has increased since the financial crisis of 2007–09. However, if I begin the discussion by asking what extra controls or procedures have been introduced in their organisation in the last three years to counter increased fraud threats, I tend to get a very different reply – it is almost always a hesitant and muted response. It is pretty clear to me that most business entities have not increased their anti-fraud measures to match the increased fraud risk at all. Instead, many organisations will have, in effect, reduced them. This is because middle managers feature heavily in most recent corporate redundancy programmes designed to reduce staff numbers and so save costs – exactly the people who provide crucial segregation of duty controls. Smart controls, which could be used to bridge this widening gap, are often ignored, not because of cost but through a combination of a lack of awareness and a failure of willpower and commitment by directors and managers to take tough action. This management failure could carry its own risk for those individuals at the top in business because, should their own organisations fall victim to fraud, they could well be accused of negligence.

There can be no real excuses today for directors and managers not being well aware of fraud risk. The various fraud threats, both ...