Difference Between Know Fraud – No Fraud

Know FraudThe Difference Between Know Fraud – No Fraud

As we go into the New Year, there are several things businesses have to do in order to successfully battle fraud in 2015. Both of them involve understanding the difference between know and no.

First, businesses absolutely have to KNOW fraud. Perhaps more importantly, senior management should be examining their anti-fraud attitude.

Many businesses who think they “know fraud” approach fraud with an “it’s the cost of doing business” philosophy and that’s an excellent recipe for revenue rip off. Instead businesses should be working towards a “NO” fraud approach

Knowing Fraud

Knowing fraud means several things. One involves training. Employees are the front line in the battle against fraud and the more they know about the crime, how it’s committed (Sun TzuThe Art of War) and who commits it (Know Your Enemy), the better prepared they’ll be to shut the door on it.

For compliance purposes, while having an annual training program may fulfill your regulatory obligations, it’s not effective to simply have an annual training program. When analyzing training programs the criteria for success is not only the content but the regularity of the training provided.

One time, annual training, is really ineffective in helping your employees “know” fraud.

Knowing fraud also means that your training program is much more than “we send several employee’s to conferences” every year. While that may benefit those employees fortunate enough to attend out of town conferences, it does absolutely nothing for the rest of your employee base.

In a world where fraud is constantly changing and evolving, annual training fulfills regulatory requirements but fails to address the fluidity of the crime that your employees need to know about to be effective in their battle against it.

Battling “fraud fluidity” requires “training tenacity.”

Knowing fraud also means that your business is well versed in both the external threats and the internal threats facing you.

NO Fraud

We’ve talked about the importance of having your employees “know” fraud but that’s only half of the equation.

The other half of the equation is your attitude about fraud. Is your company a “cost of doing business” company or a “NO” fraud company?

A NO fraud approach means that your business isn’t comfortable with a “fraud is the cost of doing business” factor. Instead, your company is aggressively working towards a “ZERO” (NO) fraud tolerance policy.

Some of you may be thinking that it’s not possible to completely eliminate fraud and while that may be correct, it’s what businesses should strive for. Otherwise, the cost of doing business approach means that your business is comfortable  losing a pre-defined (6,8,10%) amount of revenue.

The Last Word

The inherent issue with the “cost of doing business” approach is that you must have solid measures in place to control fraud at those loss amounts. If you don’t do that effectively, or the criminals are better at committing fraud than you are in preventing it, losses can easily escalate (double) beyond pre defined loss figures to unacceptable (12,14,16%) loss amounts. This diminishes your ROI and negatively affects bottom line profitability.

It may even be the nail that results in the “out of business” sign being hung on your businesses door.

Realistically, you may still have fraud with a “NO” fraud policy but when you actively strive to have NONE, whatever amount you do have will almost always be less than the pre-established (cost of doing business) amount.

Those are our insights. What are yours?

For more information on how we can help your businesses prevent risk, reduce major fraud losses and improve operational ROI, contact us to schedule an initial consultation. No obligations…just unique insights from an industry leader.