What are You Doing About the Risk of Fraud in Your Organisation?

Part I

The Menace of Corporate Fraud                                

Let me tell you a little story.

Sometime during my Fraud Detective years in Bulawayo in the 90s, I had occasion to investigate a case which had been reported and recorded as a Fraud at one of the police stations in Bulawayo.

When I interviewed the person who had been named as the “accused”, he confessed to the crime of Fraud as indicated on the police report. However, upon preliminary examination I noticed that the elements of the crime did not amount to Fraud. Theft matched the circumstances better. In fact, I concluded that the crime at hand was Theft and not Fraud. When I relayed this new reality to the accused, he was not amused. “No”, he said, “I did commit the crime of Fraud not Theft”. My explanation of the difference between the two could not help; he was proud to be a fraudster not a mare thief!

This short story, true to the dot, is a testimony to the predicament we face in our organizations in Zimbabwe. Fraud is somehow viewed as cool, trendy, even sexy. It’s a sad fact of life. It makes the prevention, detection, investigation, and prosecution of Fraud a trifle burdensome. One has the feeling (if you are in the fraud fighting community like me) of sailing against the wind.

What about the business leaders? How do they react to this “sad fact of life”? The ostrich comes to mind here! But at what cost? The global statistic, according to the Association of Fraud Examiners [http://www.acfe.com/rttn/2010-rttn.asp], is 6% of medium to large enterprises’ turnover lost to fraud annually, on average. With the attitude exhibited in my Bulawayo story, we can only imagine what the situation, in dollar terms, is like in Zimbabwe.

Ladies and gentlemen, Fraud is a manageable risk. 

I ‘ll be examining the framework of fraud risk management in Part II, in my next post.

© Caleb Mutsumba

What do you think? What strategies do you, or your company, use to manage the risk of fraud and error in your organisation? Are you primarily proactive or reactive in your approach to risk management? Share your experience in the Comment box below.

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