Workplace Fraud Prevention

Regardless of size, all organizations are vulnerable to workplace fraud. Fraud can take many forms—including embezzlement, forgery, theft of inventory and other assets, and computer crime—and can continue unchecked for years. The financial impact on an organization of these so-called “white collar” crimes can be devastating.

The most cost-effective way to manage fraud is to prevent it. Although insurance can help recoup some monetary losses resulting from fraud, other losses can never be recovered, such as losses resulting from adverse publicity, the disruption of operations and time spent with law enforcement officials and others. However, the consistent application of sound risk management practices can minimize opportunities for white-collar crime, helping to spare an organization the financial loss—and humiliation—that can result from a determined employee’s fraud scheme.

Although businesses may differ in their fraud risks, most fraud response programs need to incorporate, or at least consider, certain fundamental elements. This is true of businesses of all types, sizes and organizational structures.

  • Ethical values of the company: A highly ethical business culture is an essential element of any effective fraud prevention and deterrence program. The culture of an entity starts with, and takes its tone from, the very highest level of the business. The “tone at the top” permeates the entire organization and is, therefore, a huge component of company culture. A corporate value system built on honesty, integrity and ethical values presumes a lack of tolerance for behaviors that lack integrity.
  • Code of ethics or code of conduct: Many companies incorporate their key ethical values into a formal policy document, typically referred to as a “code of ethics” or “code of conduct.” Establishing and communicating such a code are excellent ways to ensure that employees and business associates understand the corporate values and the expected behaviors in support of those values. A code of ethics or code of conduct commonly includes specific segments
  • Business structure: Business structure includes, but goes beyond, organization charts. Every person within an organization is entitled to (and must understand) his/her roles, responsibilities, accountabilities and reporting relationships.
  • Whistleblower and hot-line programs: When fraud occurs, it is often the case that someone associated with the organization observes questionable behavior, notices discrepancies in records or practices, or learns other information that arouses suspicion that something wrong is taking place. Whistleblower programs often include so-called “hot lines,” i.e., toll-free telephone lines dedicated to receiving whistleblower information.

Learn more information on preventing workplace fraud.

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