Why Should Successful Businessmen Be Most Concerned With Fraud?
Businesses big and small are targets of the fraudster. Any weaknesses in financial controls will be sought out if there is financial gain possible. A big business will always be an attractive prospect to the serious fraudster looking for substantial gain, and is likely to provide several possible opportunities.
More and more businesses are appreciating the need to defend themselves from the threat of fraud. They may eventually understand that it does not actually take a lot of work or expense to hugely decrease the risk of fraud happening. However, there are many, including some very large businesses, which are still somewhat complacent when it comes to considering the risk of fraud.
When fraud investigations are conducted by a forensic accountant or by forensic accountancy firms it is often too late to save the business from losses which have already taken place. Sometimes these losses are large enough to threaten the health of the company. Sometimes they bring the company down and the frauds are being investigated within a resulting insolvency. The advisable course for a developing business to take is to have an expert review its anti fraud defences on a regular basis.
The fraudsters will often target businesses that are recently successful. Businesses that have grown rapidly, or smaller concerns that have merged, sometimes do not attend to the additional risks of fraud immediately. The growth period of a business is the time when it is most vulnerable. For example, individual managers of departments may be in control of their small area, but the way in which the divisions interact may not be developed immediately and gaps in the financial controls emerge. Most businesses address these problems eventually as the business gets used to its new and busier operations, but the time lag can be long enough for the fraudster to seize the opportunity.
All change processes in a company can mean extra risk, and fraud is often the last that is considered. It is the time when temptation causes the otherwise mostly honest employee to seize an opportunity, especially if they feel threatened by the changes that are taking place. The success and growth of a business weakens its defences to fraud. There is a bigger target often with a defence system suitable for the original small concern. The growth necessarily creates new processes and a new framework for dealing with finances, with an increasing number of vulnerabilities that all need protection. Failing to deal with these can render the growth meaningless as additional profits are eroded through the gaps. The managers of any successeful business must make sure the development of its fraud controls matches the increase in turnover.
About the Author
Mark Jenner is a Fellow of the Institute of Chartered Accountants in England and Wales, a Certified Fraud Examiner and has a Masters Degree in Fraud Management. He runs his own business as a forensic accountant specialising in fraud matters. His web site can be found at => http://www.mark-jenner.com
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