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How To Protect Your Business Against Fraud

No organization is immune to fraud. According to a study by PYMNTS, 98% of B2B businesses have experienced an attack, costing them, on average, 3.5% of their annual revenue. Of all large enterprises, 52% have encountered fraud, and 20% lost more than $50 million. The impact on small businesses is equally disconcerting, with 25% of victims reporting an average impact of over $1 million.

All these statistics point to one thing: the prevalence of a very real threat that businesses can no longer ignore. You stand to lose not just your physical possessions and critical digital assets. Customers, employees, and supplier data may also come under threat. Even intellectual property, like product designs, marketing plans, and strategies, are all at risk. Losing them could result in grave financial, operational, and reputational costs. Imagine compromising confidential customer data due to phishing fraud: regaining your customers’ trust and winning them back could take years of hard work.

Therefore, a proactive approach to fraud prevention is crucial for building a sustainable organization. And in this article, we will discuss proven steps to protect your business against fraud of different types.

What types of fraud could your business experience?

Primarily, there are two types of fraud—internal and external.

Internal fraud could involve an employee clocking in additional work hours or taking home a few office supplies, such as staplers and notepads. It could include graver incidents as well, like using company credit cards to pay for personal expenses and accepting bribes from vendors. Payment fraud, embezzlement, check tampering, false insurance claims, and procurement fraud are also common.

External fraud involves outside threats such as cyberattacks. For example, criminals could launch vishing attacks to access confidential bank details and wipe out business accounts. According to a PwC survey, more businesses experienced digital fraud than other fraud-related threats.

Vendors and other partners can defraud you, too. For example, a supplier may overcharge you for an inferior quality product or fabricate credentials to win a contract.

Even customers could deceive your business by, for instance, providing bad checks or claiming they have not received a product once it is delivered. Customer fraud can include many other deceitful acts, such as purchasing products with stolen credit cards.

The good news is that most of these threats are preventable. A reverse search on PhoneHistory could help avert a vishing attack. An employee background check can help avoid employee fraud. And a robust virus guard could protect your business from a hacking threat.

A severe lack of awareness prevents many organizations from setting up these defense mechanisms. But continued ignorance could be costly and may even lead to detrimental outcomes. So next, we will explore how you could avoid or minimize fraud risks with effective protective measures.

How to protect your business against fraud

1. Digital security

Business’s technology infrastructure, digital tools, and practices play a critical role in amping up digital security. These include:

  • Setting up secure firewalls to prevent hackers from infiltrating your network.
  • Applying effective password policies for accounts, files, and devices.
  • Protecting digital devices from virus threats with up-to-date anti-virus software.
  • Adopting access controls to restrict employee access to sensitive data.
  • Screening digital security practices of business-critical vendors and other partners.
  • Implementing BYOD (bring-your-own-device) policies, especially for employees working remotely.
  • Restricting downloads, data sharing, and external device usage for employees privy to sensitive and confidential data.
  • Deploying automation where possible for routine tasks.

2. Physical security

Ensuring physical security is not just about employing security officers or installing surveillance cameras. Here are a few essential measures that you will need to adopt:

  • Enabling access controls for different areas of your business premises and monitoring entry records.
  • Storing hardcopy versions of files and documents only for critical requirements and keeping them in secure locations.
  • Conducting employee background checks before hiring new staff.
  • Screening suppliers and partners for ethical practices and business dealings and setting up systems and processes to manage external partnerships.
  • Reviewing workflows and procedures and instilling adequate internal controls to prevent fraud.
  • Regularly implementing scheduled and unscheduled audits.

3. Staff training and awareness

Your employees are vital to a robust digital and physical security framework. Without them, you can only achieve so much in preventing fraud and minimizing threats.

What steps should you take to gear them up so they can help drive your enterprise’s security measures?

  • Educate staff about different types of fraud, business and individual risks, and how to identify and prevent them.
  • Teach them security practices such as avoiding email links and setting strong passwords.
  • Ensure they understand your organization’s security and fraud prevention policies, how to align with them, and the possible consequences of policy violation.
  • Set up a whistleblowing policy and create a safe environment for employees to raise concerns confidentially.
  • Establish KPIs to hold relevant employees accountable for managing budgets and expenses.

4. Backups and contingency

A contingency plan is just as important as a fraud prevention plan. It will help you prepare for future threats and respond effectively to minimize the business impact. Moreover, it will allow your enterprise to recover faster and mitigate operational disruptions, which could otherwise have costly and long-term repercussions.

Here are a few essential steps to consider:

  • Maintain backups of digital and physical data. It could provide a lifeline for your organization in the event of data theft or a ransomware attack.
  • Carry out scenario planning exercises by taking into account various fraud threats. Establish stringent policies and business continuity action plans to help get back on your feet as quickly as possible in each scenario.
  • Purchase an insurance policy so you can recover financial losses in case a fraud-related incident occurs.

To recap

Any business can experience fraud, regardless of its scale or industry. An attack could arrive from both internal and external sources. And failure to anticipate and avert them could result in costly consequences.

Creating a solid defensive barrier against fraud is, therefore, critical. Robust digital and physical security measures and staff training should be top priorities. Of course, no one can entirely escape fraud threats in today’s dynamic and fast-changing business environment. So, anticipating possible risks and having backups and contingencies in place is also imperative.

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