Fraud can occur in many forms to businesses and can happen to any type of business of any size. The impacts of fraud can be devastating, not just financially but also to the reputation of the business.
With the current economic climate, resources and financials can be tough on businesses and businesses tend to steer their focus towards growth and innovation which may mean protection, risk management and due diligence takes a back foot, often seen as time consuming or expensive.
Fraud can come from a number of areas such as :
- Staff
- Suppliers
- Customers
- Cyber
- Third parties that have no connection to your business.
Cyber Security
Looking at processes in place to report and detect fraud is important. The obvious one that many businesses think of is cyber, for example phishing emails, viruses or targeted attacks at ecommerce websites. These are often covered by a cyber and data policy, and staff training, however, in 2022 there was a 26% increase on these types of attacks and fraud to businesses. 83% of these were due to phishing emails, with the remainder being more sophisticated attacks.
Customer and Supplier Fraud
Customer and supplier fraud is often overlooked and can be extremely detrimental to the business and reputation. Knowing your customers and suppliers is very important. Completing due diligence on each of these may feel unnecessary in some situations however, these types of fraud often begin with legitimate transactions and then can lead into fraud. If any form of payment terms are offered ensuring relevant credit checks, business viability and identification checks are extremely important.
Staff
2023 data on staff fraud show that a shocking 95% of businesses will at some point encounter employee theft or fraud. This includes theft from money and goods but also items such as customer data, altering documentation or overinflating items to skim money or claim money that is not owed.
Third Party
The hardest fraud for businesses to risk manage against is third party fraud. This type of fraud can come in many forms and is often committed by a person not known to the business of business owners or someone they may have encountered on a singular meeting. Examples may be where a person impersonates an employee or owner of your business to obtain money or goods. This could be done through applying for credit, ordering goods on an account, pretending to sell a good or service and obtaining payment for this but not delivering the goods or service or false reviews of a business on social media to name but a few.
How to Protect your Business from Fraud?
Ways businesses can help protect themselves against fraud are:
Staff training – this should include on reporting processes, spotting items such as phishing emails, reporting when their gut instinct may flag something that is not right, reporting errors on customer files from other members of staff or unusual activity and many more.
Implement security systems and procedures – having adequate software, security, VPN’s, two factor authentication, payment processes and levels of authority are all important to reduce the risk of attacks and fraud.
Customer, Supplier and Employee checks – ensure adequate checks are completed. These need to be proportionate to the risks such as credit checks, criminal record checks, references obtained prior to commencement of employment, social media etc.
Instruct a third party – having a third-party company to advise, complete checks, deal with internet security may seem like an unnecessary costs however if they are experts in that field and it is what they do on a day to day they will be abreast of all changes, new exposures and leave you the time to work on or in your business.
Complete checks on your own business – completing credit searches on your own business to check if any applications have been made on your behalf is as important as looking after your own credit score. Audit your files, procedures and policies regularly to check items have been completed correctly and there are no errors.
Investigate and report – if at any point something is flagged from staff, checks, third parties then do not brush it off, ensure you investigate further and report to the necessary parties if required. Businesses can receive fines from bodies such as the ICO or regulatory bodies if this is not done and the sooner fraud is detected and acted upon the lesser the impact has on the business financially or its reputational.
Purchase the relevant insurance to protect yourself – speak with an insurance broker regarding your risks and exposures. Insurance can be purchased for not only the physical theft but there is also cover for legal, crisis containment, cyber theft and business interruption and many more to help protect your business.