Many people are confused about what fraud prevention means in an organization.

Surely, some of you may have the answer immediately: prevent fraud, of course!

At the outset, it may seem like a redundant question. However, we want to ask if you know how such prevention is carried out and why it is necessary to avoid its consequences- such as the losses they cause, the tax penalties, and loss of external reliability?

According to recent research carried out by the data analytics company Experian, more than 45% of businesses in India have seen an increase in fraud amid the pandemic.  A terrifying number, right?

The primary reason behind such occurrences, according to this report, is that Indian companies emphasize on revenue generation without adequate attention to fraud detection and misappropriation of the company’s resources. This suggests that most organizations fail to monitor internal processes, perform hiring without involving employment verification companies, allowing the occurrence of fraud and suffering from substantial losses in the process.

This is the primary reason why understanding the implications of fraud on your business is so important to protecting your company from such unwanted situations.

In this article, we will discuss how the strategy of fraud prevention works, its importance and analyze some tips, so you can avoid putting the stability of your company at risk.

What is considered fraud within a company?

Most of the time, corporate frauds are actions based on one or another corpus delicti. They are generally aimed at harming the interest of the commercial sector of the economy, related to the business turnover, the shareholders and investors. According to experts, fraudulent actions include all the processes that incorporate:

  • Misuse of resources of the company, its products, parts, supplies or financial resources.
  • Over-billing of notes or orders
  • Various deviations
  • Parallel agreements or those that do not serve the companies’ interests

What are the most frequent scams?

There are several types of fraud that can vary depending on their nature and the niche in which the company is working. For instance, for companies dealing in the financial and technological arena, it is common to see fraud related to data leakage, cloning and manipulation of information.

For companies dealing in the logistics sector, the most common type of fraud can be related to laundering or embezzlement of money and goods.

Generally, fraudulent actions are based on three pillars:

  • Rational
  • Motivational
  • Chance

Usually, the reason and motivation are present in those who commit the fraud, and the organization already provides the opportunity. Therefore, it is up to the management to develop different strategies to minimize the opportunities and possibility of occurrence of fraud in a company.

So what can management do to combat and avoid fraud scenarios?

Firstly it should be understood that no one can completely protect a company from conscious and irregular acts. However, you can and should find methods to minimize the risks related to the fraud.

One of the most feasible solutions is to create transparent processes. However, we all know that the bigger the company’s size, the more challenging it is to put this into practice. Therefore our recommendation is to invest in a reliable ERP system for internal and external audits.

In addition, businesses can also automate several processes and have a fraud prevention team.

What does fraud prevention do?

Instead of knowing the most common irregular processes, we must understand what fraud prevention does and how organizations can implement an efficient program.

Fraud prevention includes a set of security measures to avoid a scenario that allows the occurrence of fraud in the first place. These measures help on three fronts, which include:

  • Training and education

Ethics, values and norms are not only applicable to society, they have equal importance in the corporate sector. To avoid the argument of ignorance, it is essential that all the rules that guide the company are passed on to all employees. If possible, all the rules should be documented and sent to every new team member.

This suggests that all the rules and regulations must be public and in general knowledge of the employees.

  • Establishment of penalties

To avoid fraud related acts, it is essential to underline how each action of such nature will be treated in the company. These decisions can include terminations, fines and even lawsuits. However, the consequences, of course, depend on the level of impact caused, the position held within the company and the responsibility of the employee who has carried out the act.

  • Monitoring

This is the most challenging phase in a fraud prevention plan. After all, a large amount of data from all sectors needs to be continuously monitored. On the contrary, integrating all the industry sectors, cloud storage, and process automation significantly facilitates identifying and detecting bottlenecks, weaknesses, and fraud.

In addition, internal and external audits, frequently performed, greatly reduce the fraud risk and facilitate the monitoring of the areas and functions most susceptible to this type of event. External audits are advantageous to ensure that managers, partners and staff who perform fraud prevention internally in your company are also continuously monitored. 

Additional tips to protect your business

  • Be careful when hiring new professionals

Hiring resources is always a challenging task, but this advice is especially important for organizations dealing with financial data. Hiring professionals who need to deal with confidential information is always a risk.

Therefore, it is important to perform a verification of employment, the applicant’s previous work and conduct in-depth evaluations. Such things are necessary to ratify the fraud prevention strategy.

  • Always invest in trusted companies and technologies

It is completely natural for companies to outsource processes and stages, in some specific cases, it is the best thing to do. Whenever a company hires a new technical assistance provider, a logistics intelligence platform or software, they need to analyze if it has a solid reputation in the market.

Another position supporting fraud prevention is corporate governance, a great ally in regards to monitoring, transparency and corporate responsibility.


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