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Four ways to prevent fraud in your business
As we in South Africa are only too aware, the cost of fraud can be overwhelming.
Zaakir Mohamed, a director and head of corporate investigations and forensics at commercial law firm CMS RM Partners, points out that, “Companies lose not only an estimated 5% of their annual revenue to fraud, but place their reputations firmly at risk if they fail to proactively promote anti-fraud awareness measures within their organisation.”
This is why events like Fraud Awareness Week are so important.
Coinciding with International Fraud Week (15 – 21 November), South Africa will be recognising the gravity of the situation with its own Fraud Awareness Week (12 – 17 November).
At the centre of this is an awareness campaign based on principles established by the International Association of Certified Fraud Examiners (ACFE), which asks local businesses to step up their own detection systems and create effective lines of communications to report fraud within their own operations.
It’s also about forming a cultural awareness within an organisation as to what exactly constitutes fraud. Explains Mohamed: “Fraud generally refers to the intentional manipulation of the truth for financial or personal gain
Putting systems in place within an organisation, says Mohamed, starts from the hiring of new staff members right through to monitoring the day-to-day undertakings within a company.
To this end, he recommends a few simple guidelines that all business leaders should have in place to inculcate an anti-fraud culture within an organisation.
1.Establish entry-level priorities
Fraud prevention begins with the hiring of employees, and it is essential to do thorough background checks on all candidates who apply for a position, using all resources available.
It is important to conduct detailed research on a candidate,” notes Mohamed. “It is also essential that references be requested and actually checked. So often, companies ask for references but fail to make contact with the relevant parties put forward.”
2.Put an anti-fraud plan in place
This is a blueprint for managing fraud within your organisation, and should begin with an analysis of the areas of business that may be vulnerable to fraud.
“This should include a code of ethics, and should also provide guidelines to staff on how to conduct themselves and what to look out for when doing business, both inside and outside the organisation,” says Mohamed.
3.Educate your staff around fraud prevention
It’s one thing to have a plan in place, but quite another to implement it. An important aspect of the success of any plan is the ongoing training of staff to ensure they remain current on practical fraud prevention techniques and how to spot instances of fraud within an organisation. This will also include continual reminders of the consequences of fraud, which could result in termination of service or, even more damaging, legal action.
4.Put viable avenues in place for reporting fraud
Crucial to fraud prevention is creating ways in which employees or clients can report incidents of fraud. In this respect, it is important that organisations have an effective whistleblowing system in place.
According to the Sub-Saharan Africa Edition of an ACFE Report to the Nations (2020 Global Study on Occupational Fraud and Abuse), 48% of all fraud within organisations is reported via tips, of which 40% is reported by employees and 24% by anonymous parties.
Mohamed comments on the importance of a whistleblower in preventing fraud.
“Of these, the highest rates of tips being received were by those companies that had whistleblower hotlines in place. As many as 69% of organisations had these. However, in whatever way organisations go about fraud prevention and detection, Mohamed believes that both the local and international versions of Fraud Awareness Week are wake up calls: “Now more than ever before, as economies look towards recovery, it is crucial for executives, co-workers, and stakeholders within organisations to define their collective roles in a commitment to anti-fraud.”
This article was written by Zaakir Mohamed, Director and Head of Corporate Investigations and Forensics at CMS RM Partners.
Featured image: Zaakir Mohamed, Director and Head of Corporate Investigations and Forensics at CMS RM Partners (Supplied)