Fraud Risk Management Services


  • Diagnosing Fraud Risk
  • Detect weaknesses in controls against anti-fraud
  • Suggest solutions to mitigate controls against Antifraud
  • Periodic monitoring
  • Workshops on Fraud Detection & Preparation
  • Benefits Management for Competition

Fraud Risk Management

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Fraud risk management is a system that describes all the protocols relating to the detection, assessment, prevention, control, and reporting of fraud to senior management. The risk of fraud in everyday life particularly in the business world. Though risk cannot be entirely avoided though it can be avoided. An organization should strive for a structured as opposed to a hazards approach. All organizations need to work on the overall risk management to save your company from any mishappening. An efficient fraud risk management approach can have a significantly positive impact on the overall cost of fraud in any organization.

There are majorly three types of frauds:

  • Fraud By False Representation: Where a dishonest portrayal is made by someone to cause loss to another party or make a gain by misrepresentation.
  • Fraud By Failing To Disclose Information: Where someone intentionally hides the information or disclose the information which they are under a legal duty to disclose to make a gain for himself or inflict a loss on another.
  • Fraud By Abuse Of Position: Where someone holding a position of responsibility abuses the position to make a profit or cause a loss on another party.

Other offenses include the possession of articles for use in fraud, making or supplying articles for use in fraud, participating in a fraudulent business, and obtaining services dishonestly.

Below are the principles of fraud risk management to save your organization from any kind of risk.

  • Fraud Risk Governance: Fraud risk management must be written in the policies of the organization, defined responsibilities, and ongoing procedures that implement an effective program. Everyone on the board and top management must have clear roles to convey the required information about the program. The tone from the top can be mirrored in the interpretation within the company of fraud prevention and identification. It is important to have a responsible person with adequate knowledge and resources. Make sure all the fraud risk management programs should address the following issues:
    1. Roles & Responsibilities
    2. Fraud Awareness
    3. Conflict disclosure
    4. Fraud Risk Assessment
    5. Reporting Procedures
    6. Whistleblower protections
    7. Investigation process
    8. Corrective action
    9. Quality assurance
    10. Ongoing monitoring
  • Fraud Risk Assessment: The basis for fraud prevention and identification is a formal risk assessment that addresses the actual risks posed by the company as determined by the type of risk, likelihood, and potential risk cost in a traditional expected benefit environment. This allows the agency to adapt program activities for cost-effective avoidance, which may entail more or less tolerating a specific risk. Assessing the fraud risk involves looking at how employees interact with the resources of the organization. One of the legs of the Fraud Triangle that is largely decided by the company itself consists of their rewards and possibilities. Risk assessment has to be very clear about how policies and procedures interact with specific roles. It is important to note that the origins of these threats, especially in highly networked and data-dependent operations, can be external as well as internal.
  • Fraud Prevention: Preventing fraud is easier rather than detecting and curing it. Prevention is rooted in a culture of awareness of fraud, understanding of common policies and procedures, a haven for whistleblowers, and ongoing communication from top to bottom about the importance of fraud prevention. It is less likely to occur when everyone knows that fraud is feasible and a serious issue for which the organization has developed detection mechanisms.
  • Fraud Detection: Controlling, monitoring, and reporting promote faster detection of fraud. A whistleblower policy reports designed to highlight potential and common indicators of non-standard outcomes over time and other controls that alert people to potential fraud are key detection measures. It goes without saying that if they are not monitored, installing these indicators will not affect them.
  • Monitoring and Reporting: It is useless to create information if that doesn’t get to the right person to take action. The establishment of responsibilities and procedures is to ensure that timely information is reported to someone who can address a problem is one of the key elements in the initial planning for a fraud prevention scheme. These systems trigger responses that have strong legal implications, so the review of the legal rights of affected parties and compliance with applicable law is one of the essential components.

To protect your company, you must be aware of any vulnerabilities that you may be exposed to and strengthen the existing arrangements. You need to conduct robust fraud risk assessments by following these simple steps.

  1. Identify Risks: Make sure you assess your current operations and processes. You could also refer to the historical data for identifying the trends and patterns.
  2. Quantify Risks: Estimate the probability of each type of fraud and its effect. To estimate the level of risk along with your risk exposure, use the probability/impact matrix.
  3. Mitigate Risk: Once risk has been identified you can use the following model to mitigate them.
  • Transfer: In other words, the financial consequences are transferred to a third party. This generally means having insurance.
  • Terminate: The simplest solution and the most often overlooked. Stop doing risky stuff. This can be accomplished by adjustments in practices and procedures, or even by stopping engaging in low reward and high-risk activities.
  • Treat: You seek to reduce the chance and effect of risk here. Again, this could require improvements to systems and procedures, but this is particularly critical when risk training is necessary for the staff.
  • Tolerate: You’ve found a risk, you know its potential impact, but it simply isn’t worth the cost of doing anything about it. This might include low incidence and medium impact hazards, or medium incidence and low impact hazards. Do not consider doing this, however, with catastrophic losses – such as insurance for buildings. Before the COVID pandemic, failure to pass the risk was a good example of why not.
    1. Monitor and Review Risk: Risk management is an ongoing process so it is important to review it regularly. At the identifying stage, you will get insights on how to monitor and review. Though you will have to be ready for the new risks all the time. So, plan the prevention accordingly. Think of your evaluation like you would virus apps, there to defend you in need of testing and upgrading periodically.

The standardization agency works on the creation of universal standards and their application. These standards must be based on effective risk management to help all the organizations to perform well in the environment of uncertainty and can manage the risk. Develop a standard that can help avoid the consequences that can harm your organization. For effective risk management try and focus on the following principles.

  1. Integrate into organization
  2. Structured and comprehensive
  3. Based on the best available information
  4. Customized and proportionate
  5. Takes human and cultural factors into account
  6. Inclusive
  7. Dynamic
  8. Facilitates continuous improvement

If we talk about organization managers are still in a denial mode when it comes to fraud. Even after losing significant revenue due to fraud, many managers are still negligent. However, it is ironic to witness their emphasis on the YoY development of the business and delivering shareholder value. Though the regulators are holding the directors accountable for frauds throughout the organization or outside it. They are also accountable for frauds that are in control of the management yet they did not take clear action to prevent the same. Though the fraud risk exists in every organization through the degree might vary. So it is better to work for prevention before it happens.

For an effective fraud risk, management model an organization will have to focus on risk awareness model building, accountability, and transparency on how fraud is being currently managed by the organization. This will enable the organizations to have the control that will prevent the risk on the first step. It will also help in the early detection of fraud so that you can easily and effectively respond to fraud. A risk management platform will create a wide view into suspicious activities across all the transaction channels that will assist in illicit behaviors in real-time to keep the fraud within the risk appetite of the organization.

A risk awareness culture will improve the fraud risk management across the entire organization, engaging employees to identify and report fraudulent behaviors to current parties to handle. Make sure your organization has technological tools to fight fraud in real-time. You can use technology to your advantage against securing from the frauds. Use effective and efficient resources to create prevention strategies so that fraud can be prevented. You can also focus on artificial intelligence, machine learning, workflow, and automation for the prevention of fraud. This will create an enterprise-wide view of fraud risk. This will increase the detection and prevention rate of fraud.
Though this may increase the overhead cost it will prevent the losses that will be much higher than the overhead costs.

There is risk involved in every organization so all organizations must be vigilant and follow the steps for fraud risk management. Though there are few types of organizations where the risk of fraud is huge and it keeps on happening in that case, organizations should build a risk assessment team. A good risk assessment requires input from various sources. Management should identify the risk assessment team and give them training on how to avoid fraud. Individuals with varying skills, talents, and experiences from around the company should be included in the risk evaluation. Management should assist in the study, as they are collectively responsible for the success of the fraud risk management activities of the agency. The risk assessment team should have the following members.

  • Accounting/finance staff, who are aware of the mechanism of financial statements and internal controls.`
  • To leverage their experience of day-to-day activities, the nonfinancial corporate unit, and operations staff.
  • Legal and compliance personnel
  • Internal auditor

Risk tolerance is different for every organization and also the way to deal with it is also different. Although some companies just want to discuss fraud risks that should be tackled,
Some agencies require a more comprehensive fraud response mechanism to have a material financial impact. Many companies state that there is a zero-tolerance policy concerning fraud. Even though there is still a certain risk factor that is involved. Sometimes companies ignore the fraud whose prevention is too expensive or is time-consuming. This may be very dangerous and has the highest risk. The level of risk tolerance of an organization offers management support on how to respond to the risk of fraud. Management has to enforce the proper standard of controls depending on the risk tolerance it has set for the department. The organization will have to be selective and effective.

Most research has demonstrated that fraud is prevalent in all types of organizations and businesses. It is a very costly problem that will continue to increase as the risk of fraud increases. This growth is attributed, among other causes, to factors such as the accelerated advancement of developments in technology, more dynamic economies, and an increase in globalization. There are some key recommendations from different researches that can indicate the significance of an integrated strategy to tackle fraud. With the increase in fraud each year. The correct risk management model can help you to manage the damage created by the fraudster. Legalraasta has a well-structured system for fraud risk management that provides the visibility and clarity required to tackle fraud in real-time, shielding the company from intruders. It is now time for the financial industry to incorporate fraud risk management into the heart of the business, a strategic edge that no company can continue to ignore for a long time.

The unique combination of anti-corruption, fraud risk management, and investigative subject matter experience of our team will easily detect program defects and repair your vital programs. According to the organization’s business and special practices, we tailor fraud risk assessment.

Fraud Risk Management

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