When dealing with fraud, companies should take corrective action. However, there are challenges in ensuring those actions can be implemented effectively.

Understanding the Complexity of Fraud

Fraud in companies can appear in various forms, from the misuse of assets and inventory theft to the falsification of records, including employee payroll records. In many of the cases we have handled, business owners only realize fraud is present after fraud has been happening for a long time and the amount of loss incurred is quite large. Business owners who have faced fraud cases surely understand the complicated nature of the fraud handling process, which includes the formation of a team, gathering evidence, conducting investigations, and documentation. In some cases, the entire fraud handling process can take months.

Despite all the work put into dealing with fraud, the risk of fraud still exists. This article discusses one of the common challenges faced when addressing the risk of recurring fraud and the measures that can be taken to stop it from happening. 

A Challenge to Changing Habits

Business process changes and the implementation of new internal controls are often met with opposition from within any company. Employees can feel uncomfortable with the new processes. There is a possibility that transitions and implementations of new processes that do not run smoothly can disrupt company operations.

Ensure employees are ready to adapt to the new effective processes. Provide adequate training to employees about the changing processes. Educate employees that the new processes are aimed at ensuring the company can deal with existing business challenges and risks. Set a reasonable time to guarantee the process shift runs smoothly.

Commitments from Management

Management plays an active role in ensuring that the processes and internal controls are aligned with the company’s overall strategy. Commitment from management is the primary basis for managing risk and creating a sense of accountability within the company. Management should provide a strong message to its employees about the importance of internal controls to create a balance between process and results.

Aim for Prevention, Not Correction

Most fraud cases result in significant loss for the company. Therefore, it is necessary to ensure that the corrective actions that have been designed are effectively implemented from time to time.

Monitor and test the effectiveness of internal controls regularly. Identify any areas that impede the operation of internal control. Identify the weaknesses that occur and make remediation efforts within the specified time period.

Fraud handling does not only stop at implementing corrective action, but also requires effort to adjust habits and continue the monitoring process. It cannot be denied that management involvement in the implementation of monitoring plays a very large role in reducing the risk of fraud in the future.

 

 

 

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Written by:

  

 

Rizky Hidayat
Manager
Advisory