2012 protecting your business
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This document discusses protecting businesses from fraud through various prevention methods. It notes that the typical organization loses 5% of its revenues to fraud each year, totaling over $3.5 trillion globally. Occupational fraud cases have a median loss of $140,000, with 1/5 causing over $1 million in losses. Red flags for potential perpetrators include living beyond means, financial difficulties, and behavioral issues. The document recommends physical controls like background checks, access restrictions, audits and monitoring to prevent fraud, as well as cultivating an ethical corporate culture.
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2012 protecting your business
- 1. Protecting Your Business: Whos Profit is it Anyway? Fraud Prevention for Business Owners Providing businesses the prescription for enhanced profit
- 2. Alan Greggo CPP, CFE Consultant Author Senior Loss Prevention Leadership
- 3. Freds Story
- 4. Its Not My Problem! Did you know the typical organization loses 5% of its revenues to fraud each year? Applied to the 2011 Gross World Product, this figure translates to a potential projected annual fraud loss of more than $3.5 trillion.
- 5. Its Not My ProblemIs It? The median loss caused by occupation fraud cases in the ACFE study titled the Report to the Nations, was $140,000 and 1/5th of reported cases caused losses of at least $1 million!
- 6. Understanding Fraud The Fraud Triangle Opportunity Capability Pressure Rationalization
- 7. Behavioral Red Flags of Perpetrators Living beyond means- 35.6% Financial Difficulties- 27.1% Unusually close association with vendor/customers- 19.2%
- 8. Behavioral Red Flags of Perpetrators Control Issues, Unwillingness to share duties- 18.2% Divorce/family problems- 14.8% Wheeler-Dealer Attitude- 14.8%
- 9. Behavioral Red Flags of Perpetrators Irritability, suspiciousness or defensiveness- 12.6% Addiction problems- 8.4% Past Employment- related problems- 8.1%
- 10. Behavioral Red Flags of Perpetrators Complained about inadequate pay-7.9% Refusal to take vacations- 6.5% Excessive pressure within the organization- 6.5%
- 11. Oh-My!! Ive seen these! Red flags by themselves dont mean an employee is making a bad choice about your business. When you start to see patterns forming or multiple red flags, ensure your fraud controls are being adhered to and watch for unusual behavior. Dont confront an employee head on without evidence of wrong doing; get help from an expert investigator.
- 12. Most employees want to do well Be aware of Goal Incongruence Which is: Management setting lofty targets and goals and expect the employee to achieve them at all cost. The employee feels their future, their job is on the line. Employees want to succeed and please their manager and the company. If the outcome looks hopeless, the employee starts to rationalize (see fraud triangle).
- 13. CFE/ Investigator Wisdom: For FREE People only comply with rules they think are fair!
- 14. CFE/ Investigator Wisdom: For FREE Trust is not and internal control! The indictment seeks $53 million and numerous assets, many of which were seized from Crundwell when she was arrested by FBI agents on April 17. Here's a laundry list of what the government wants: Two residences and the horse farm in Dixon A home in Englewood, Fla. A $2.1 million luxury motor home More than a dozen trucks, trailers and other motorized farm vehicles A 2005 Ford Thunderbird convertible A 1967 Chevrolet Corvette roadster A pontoon boat Approximately $224,898 in cash from two bank accounts
- 15. CFE/ Investigator Wisdom: For FREE Anytime you change a system, people will always change their behavior; Whats possible? If you want people to do the right thing you have to make it personal.
- 16. Protecting Your Business- Physical Controls Pre-employment background checks Policies on dishonest and unethical behavior Supported from top management? Business Abuse Hotline; anonymous way to report suspected violations of the ethics and anti-fraud policies Restricted access to areas containing sensitive documents Maintain a system for providing an audit trail
- 17. Protecting Your Business-Physical Controls Restricted access to computer systems (accounting software, inventory, and payroll) Restrict access to areas with high value assets (shipping, receiving, storerooms, and cash) CCTV and recording equipment to monitor physical building and sensitive areas
- 18. Protecting Your Business-Physical Controls Conduct random, unannounced audits of inventory, cash, expense, purchasing, billing, etc. by internal or external auditors Prompt investigations of reported incidents of fraud Educate employees about the importance of ethics and anti-fraud programs
- 19. Active social networkers As a group, more likely to experience pressure to compromise ethics by 32%. 56% of social networkers experience retaliation versus only 18% of less active or nonactive networkers.
- 20. Top 5 IT Security Best Practices for Small Merchants Understand sensitive data, where it is and who is responsible for its protection. Avoid storing sensitive data; if required to do so, secure it. Protect perimeters with firewalls. Fortify interiors with people, procedures and technology. Get to know service providers and their level of PCI compliance. *From a white paper published by payment security and compliance solutions provider ControlScan
- 21. The tools of Business Ethics Ethics programs. Foreign Corrupt Practices Act. Federal Sentencing Guidelines. SarbanesOxley. Industry Specific Regulations. DoddFrank. Asset protection is more than just stopping shoplifters, it sets the stage for an ethical corporate culture.-Stephen Sadove, chairman and CEO of Saks Inc.
- 22. 7 Principles of Business Ethics Be Trustful. Keep an open mind. Meet obligations. Have clear documents. Become community involved. Maintain accounting control. Be respectful.
- 23. Questions? Alan Greggo Easy Risk Assessment- 11 questions to consider about your business: http://profitrxllc.com/pages/RiskAssessment Phone: (513) 236-2642
Editor's Notes
- #17: Do you conduct pre-employment background checks?Are there policies that address dishonest and unethical behavior?Are they supported by top management?Does the organization provide an anonymous way to report suspected violations of the ethics and anti-fraud policies?Does the organization restrict access to areas containing sensitive documents (such as invoices, receipts, journals, ledgers, and checks) and maintain a system for providing an audit trail of access?