How effective is your organisation’s fraud risk management strategy?

2010-11-25 00:00

THE release of the United States-based Association of Certified Fraud Examiners’ Report to the Nation on Occupational Fraud and Abuse 2008 has highlighted the global trend towards corruption being rated the number one modus operandi experienced by organisations (27% of all reported incidences).

Jessie Naidoo (senior manager, Fraud Risk Management, KPMG Forensic) stated that “the prevalence of corruption is borne out by the number of high profile cases currently in the media.

In addition, the KPMG Africa Fraud and Misconduct Survey 2005 noted that in 54% of reported cases, fraud was directly related to collusion between employees and third parties”.

KPMG is further of the view that, while a cursory glance at this data offers little more than another statistical indicator, a deeper consideration of these statistics highlights empirical evidence of a more worrying trend; the degradation of social and moral values.

The increase in the occurrence of corruption indicates that more individuals are willing to behave in a criminal or unethical manner.

The willingness of these individuals to participate in criminal or unethical acts demonstrates that they are able socially and morally to justify their intended acts.

This degradation of social values combined with the current economic pressures means that organisations need to consider the increasing likelihood that their employees will collude with external parties, thus requiring organisations to proactively reinforce their control environment to mitigate this emerging threat.

In light of the current social and economic difficulties, KPMG has developed a Fraud Risk Management Assessment Tool (FMSAT) to assist organisations with managing their fraud risks.

This model compares an organisation’s fraud risk management strategy with international best practice model.

It is web-based and takes the respondent through a series of questions designed to highlight fraud risk areas.

The results are compiled into a personalised report.

KPMG also has a web-based “Integrity Thermometer”, which is a series of questions on ethics and integrity that can be answered anonymously by all members of an organisation.

The results will indicate if ethics and integrity are slipping and give management the opportunity to implement awareness training.

In order to manage potential fraud risks, it is imperative that organisations implement an effective fraud risk management strategy.

This strategy will promote an anti-fraud culture and will also provide the organisation with anti-fraud measures to prevent, detect and respond to instances of fraud.

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