Audit & Risk

Half of companies fall short on fraud risk management

New survey finds that nearly half of businesses believe they lack the internal resources to be able to effectively manage the risk of fraud.

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Nearly half of companies fail to conduct a formal fraud risk assessment on an annual basis, a new survey of US companies has shown, highlighting just how many businesses are leaving themselves exposed to white collar crime. 

Not only that, more than a quarter have never implemented a formal fraud risk assessment, the joint study by consulting firm Protiviti and the Economic Crime and Justice Studies Department at Utica College has shown.

Companies face a number of challenges in effectively and proactively managing fraud risk. Of these the limited availability of internal resources was cited by 47 per cent of respondents as the biggest. Meanwhile, 31 per cent said that their company lacks a unified fraud risk management strategy and 29 per cent reported that fraud and misconduct is not considered high risk to the organisation. 

In the majority of cases the chief financial officer is designated responsibility for fraud risk management within organisations (18 per cent), followed by the chief legal officer, internal audit director and the chief risk officer, who each have prime responsibility in 13 per cent of those companies surveyed. 

When it comes to combatting fraud, the majority of companies run ethics and fraud awareness training programmes, although only 46 per cent conduct these every year and more than half lack a fraud detection programme. Most respondents reported that their company has a telephone hotline, website or electronic mailbox for employees to report fraud, only 13 per cent regularly conduct surprise audits.

“Fraud detection techniques, such as having a code of conduct set in place, employee background checks, awareness training, third-party due diligence and surprise audits, are crucial in not only detecting risk, but also proactively preparing for future threats,” said Donald Rebovich, professor of criminal justice and executive director of the Centre for Identity Management and Information Protection at Utica College. “A programme that engages all levels and departments in prevention and detection is vital to a company’s financial health and reputation.”

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