Being the victim of fraud risk can be quite nerve wrecking for a business at any time. During a recession, the impact of a fraud can be far worse than a healthy economic time. Regrettably, a new fraud coming to light and an existing fraud being disclosed can have substantial affect during a recession period.
In fact, to make matters even worse, well planned out cost cutting program by a company may actually reduce the efficiency of the anti-fraud measures, especially when they’re needed the most.
Pick up newspapers in the US, Europe or even Asia and you will likely come across an article based on fraud and fraud management. Key examples include Bernard Maddoff’s Ponzi schemes as well as the India’s Satyam Computer’s over-inflation billion dollar cash reserves. Australia on the other hand may not seem to be weathering well under the Global Financial Crisis as compared to the Northern Hemisphere, but regardless of it making the press, fraud tends to increase when economics conditions begin to tighten.
Why? Well, to an extent impropriety and fraud are inextricably connected to economic slump. All forms of workplace, financial, personal pressure can encourage an individual to commit fraud.
Many leading organizations believe that they already have (or are developing) strategies to detect, prevent and respond to misconduct, risk and fraud.
Here are a few strategies that would be an effective starting point for the senior executive and the board of directors:
During a recessionary period optimization and cost reduction may be critical for corporate survival, but organizations need to ensure that they do not weaken the effectiveness of the major controls needed to prevent as well as detect fraud risks. All of which can make it quite difficult for business to strike a balance between being vigilant, whilst making cost reductions.
The very deliberation of defrauding our own employers, ever during a great need, is innately wrong for all of us. Unfortunately, it simply takes one to blemish the entire bunch. In the current economic situation, the potential effect of a significant fraud risk can be commercially catastrophic.
It’s for the very reason that fraud risks need to be taken seriously, since they can shadow the entire corporate landscape.