Fraud can have a tremendous negative impact on the value of a business. Not only does the immediate loss reduce the ability of a business to pay current obligations, but the diminished revenue can significantly lower the net income figure that is often used in a multiplier formula to estimate current market value of a business.
Strategies for Reducing Fraud
According to research by the Association of Certified Fraud Examiners, an anti-fraud hotline to gather tips and information is the single most effective measure, resulting in a 54.5 percent reduction in fraud losses. The next most effective were employee support programs, surprise audits, fraud training for managers and executives, job rotation/mandatory vacation, and fraud training for employees. Each of these strategies was associated with at least a 45 percent reduction in fraud losses according to the study performed by ACFE.
Utilize Existing Strategies
Interestingly, the strategies that were most effective were also the ones least likely to be implemented by the businesses that participated in the survey. Thus, it would seem that the most effective anti-fraud measures are underutilized. While any organization is potentially vulnerable to fraud, the risk can be mitigated to some extent by setting up appropriate anti-fraud measures before a loss occurs.
For a more detailed analysis of the AFCE findings, click here.