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For any organization whether it is Government, Insurance, Banking or Health care, Risks and Frauds are a part and parcel of the structure. What is noteworthy here is that, these risks and frauds need to be managed well so that the balance always stays. After all, the core objective of any organization is to create value for the customers, stake holders, owners, investors, employees and even society. There is a fine line of distinction between how Risks and frauds need to be handled. In this article, we are going to discuss exactly that. There are two aspects of this mechanism – Enterprise Risk Management and Fraud Prevention. Let us look at each one closely. By now, you must have learnt enough about what Enterprise Risk Management exactly means, therefore no point in dwelling with its definition. Rather, let us focus on how Enterprise Risk Management is carried out. Enterprise risk management is carried out in a three step process – - Identifying key Business Risks
- Assessing and determining risk mitigation strategies
- Developing risk remediation processes
Whatever be the structure of an enterprise, performing these three steps are mandatory for successful execution of the mechanism. While there may be different renditions of these core steps, but to ensure that the system developed is fool proof, it is important that not a single step is skipped. Similarly there are two things about Frauds. First and foremost comes, Fraud Prevention and second comes Fraud Detection. Fraud Prevention - In the prevailing nature of business, where need for speed in transactions and executions is growing every day, Fraud prevention both internally and outside the enterprise is a challenge for the enterprise management board. The thumb rule for Fraud Prevention, that you may also be knowing, is “improving internal controls.” Most frauds occur due to weak internal quality check procedures. If internal records and controls are centralized and a quality cap is put on it, Fraud Prevention can be easily done. On the other hand, it is also important that the enterprise detects possible loop holes that can lead to frauds. The most important steps for Fraud Detection are - Keeping all records and data (financial, creative, business management etc.) in order and up-to-date.
- Tightening Internal policies to ensure there are no gaps.
- Informing all clients, partners, and employees about the policies so that they know when they are facing a fraudulent situation.
- Making stringent punishments for defaulters. It is important to instill the fear of punishment so that people, at the first place, do not plot fraudulent activities.
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