How to Mitigate Your Risk of Fraud in Times of Disruption
It can be tempting to get comfortable in the status quo. But as we’ve all learned, the status quo can change in a heartbeat. When it does, it can disrupt everything from your business’ supply chain to its staffing roster. Unfortunately, as you scramble to keep your business afloat, fraudsters can take advantage of your situation.
Any change can leave your business more vulnerable to occupational fraud—that is, fraud that happens in the workplace. So, how do you prevent fraud from taking hold during disruptive events? Here are a few things to consider.
Don’t let fraud prevention measures lapse.
Disruptive events, such as a pandemic or a power grid outage, are just that: disruptive. When you’re forced to rethink how you operate your business, the last thing on your mind is likely to be fraud.
During the early days of the coronavirus pandemic, many businesses were forced to close, and employees were asked to work from home. Operations were turned upside down. Processes that had relied on in-person or manual steps were forced to become fully electronic. As a result, some businesses had to cut corners on internal controls, which put them at a higher risk for fraud.
If you were to find yourself operating under limited controls for more than one month, it’s time to consider instituting a policy change or a mitigating control, which is a control put in place to reduce the probability or consequences of a threat.
Also consider that occupational fraud is white-collar crime and, typically, a crime of opportunity; most perpetrators don’t have a criminal record. With this in mind, make sure the threat of detection exists during times of disruption through periodic review or inquiry.
Make disruptions a non-issue.
What if you could avoid disruptions altogether? Engaging in business continuity planning can help. We’re talking more than creating redundancies and backups for your processes. The key is to plan for potential disruptors, so you can be ready when one strikes.
First, outline your business’ critical processes and personnel needs, and then identify possible disruptors to each. For instance, what would happen to your manufacturing process if a supply shortage were to occur? Think of the automakers who can’t manufacture cars because they’re waiting on one little part that’s stuck in shipping limbo. Or what if your Internet provider were to experience a blackout? Remember, what’s critical to your business will be different than what’s critical to other businesses.
Think of what—and who—comes next.
One disruptor that can impact every business is the absence or loss of a key leader. This is part of why succession planning is so important. At a minimum, your business should have a five-year plan in place, and it shouldn’t be a secret. People need to know who’s next in line, and who will step in when needed. Having a solid succession plan allows your business to forge ahead in disruptive times, helping to minimize your risk of fraud and maximize results.
Let us help you prepare for the next storm.
Keeping fraud prevention measures in place during a disruption? Good. Preventing disruptions in the first place? Even better. We at AEM can help you do both. Planning for potential disruptors and strengthening your fraud prevention measures now—before a disruptive event occurs—can go a long way toward keeping your business intact. Contact us today to explore your options.
Scott Mason, CPA, is a Partner at Abdo, Eick & Meyers and enjoys the challenge of solving client’s problems. Beyond tax preparation and financial reporting, he helps clients in all types of industries to overcome issues such as cash flow management, financing and budgeting, and tax, succession and estate planning.
You can reach Scott at 952.449.6215 or click here to contact him via email.
Darin Styles, CPA, CFE, is a Senior Manager at Abdo, Eick & Meyers. He works with businesses, nonprofits, manufacturing companies and bank clients in consultation and preparation of accounting, tax and attest engagements.
You can reach Darin at 952.449.6212 or click here to contact him via email.
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