After eight weeks of discussion about fraud prevention and detection it almost seems impossible to accept that, where an organisation has taken appropriate steps of fraud prevention, it can still occur. The unfortunate fact is that, no matter how good your prevention measures are, the 10% who will always commit fraud will still find a way. An integral part of any fraud prevention plan is thus ensuring that the critical people in the organisation are able to effectively respond to reported incidents. It is important to remember also that an effective response to fraud is in itself a deterrent.
There is an abundance of press articles containing examples of the catastrophic effect that fraud can have on organisations. It therefore always seems strange to me that management in organisations will ensure that they have response plans related to fires and other types of natural disasters but when you suggest that they plan how to respond to a fraud occurrence within their organisation you get a strange look. The fact of the matter is that ensuring that your response to fraud is planned can have major benefits. Here are a few benefits:
- It guides managers who may not be experienced in how to deal with these types of situations and ensures a consistent response. This will have positive spin offs in relation to staff morale and requirements related to labour legislation.
- An effective and speedy response to a report of fraud ensures that valuable evidence is protected. There is nothing more frustrating, and apt to cause unhappiness amongst staff, than having to retain an employee who is guilty of fraud because the evidence required to dismiss him was lost.
- A quick response can save the organisation money by ensuring that any funds that can be recovered are identified, protected and recovered.
- A well-organised response will ensure that any risk to reputation is considered and managed. The loss in shareholder wealth can be more devastating than the direct loss of the fraud itself.
- Contrary to popular belief, a well organised and appropriately publicised response to fraud within an organisation sends a positive message to staff and stakeholders.
- Possible insurance claims will be investigated and lodged.