Fraud threats are a serious problem for many business organisations.
Roughly one in four small businesses is affected by fraud every year. Last year, according to the National Fraud & Cyber Crime Reporting Centre, fraud losses were calculated to be around £18.9 billion.
The biggest lesson to take away for any business looking to protect against fraud is that no organisation is safe and no enterprise is too small to be targeted. But where do the most significant fraud threats arise and how can you protect against them? Let’s examine those:
Poor internal security
Many of the most common – and repeated – problems that arise when it comes to fraud are the result of poor security. This is an issue that is very easily fixed and yet many businesses fail to ensure that staff are accessing systems in a secure way.
Passwords are the most obvious gatekeepers – a good, strong password protects accounts and systems from the multiple third parties who would like to gain access to the data within them. And yet, the most common passwords in use are still “password” and “12345,” neither of which is likely to take long to break.
Your own employees
All too often, frauds and security breaches are the result of something as simple as a phishing email or an employee who has clicked on a malicious link.
Employees could be one of the biggest sources of fraud threats to any organisation, not through any purposeful intent but usually as a result of a lack of training or awareness and the inability to recognise what might be fraudulent behaviour. Invoice fraudsters, for example, might have just enough information to convince an employee that they are genuine because that person hasn’t been trained to spot an imposter – and the results could be disastrous.
It’s important that everyone in your business understands the importance of physical security when it comes to preventing fraud. That means keeping filing cabinets locked, ensuring devices that contain sensitive data are locked away and taking care of company property, such as laptops, that could be used to access a network.
It’s much easier to prevent fraud if you don’t leave an open door for the fraudster to walk straight through.
If everyone in your organisation has unlimited access to all parts of the system and all of your company data then the risk of fraudulent activity immediately goes up.
It doesn’t necessarily require a malicious intent for those within the business to create a fraud risk – carelessness or a lack of understanding can have the same result.
Steps to Preventing Fraud
Here are some actionable steps you can take as preventive measures to keep your business safe and ahead of any fraudulent manipulations:
- Train your employees — especially those in fraud-prone areas of the business — to easily recognise warning signs of fraud. They should also be equipped with prevention skills and provided with the tools to report suspicious behaviour by coworkers, customers, or any other person.
- Encryption can also be a very useful tool as long as only a limited number of individuals have access to the encryption key.
- Create and maintain internal controls that can prevent or easily detect fraud. For instance, you might want to have more than one staff handling everything from accounts payable, to invoicing, to expense management. This way, you have more than an eye on your financial processes.
- Scrutinize business bank accounts and other financial services accounts as often as you can. Most fraud cases are obvious but because management seldom checks what’s going on in the records, these fraudulent activities go unnoticed.
- Use a secure financial management or enterprise resource planning system. All of the above preventive measures are tied to this one. If you have reliable financial management software such as SunSystems, or enterprise resource planning system link NetSuite, it immediately becomes easy to detect and prevent fraud almost automatically.
Protecting your enterprise from fraud is crucial to business continuity. If you’d like to find out more about how the right financial software can help you to do this, get in touch with FinanSys, the #1 SunSystems implementation partner.