Proactive fraud risk assessments tailored to an organization’s needs can help prioritize its limited resources to match its risk appetite and contribute to a significant return on investment.
Just as there is no single antidote for maintaining good health, there is no single antidote for keeping fraud out of an organization. Both require strategies, vigilance and ongoing efforts to be effective.
Fraud risk assessments are essential to effective fraud risk management strategies, just like health checkups are necessary for effective health management.Â
Fraud risk assessments are essential to effective fraud risk management strategies, just like health checkups are necessary for effective health management. Health checkups monitor the state of known health conditions, and similarly, fraud risk assessments monitor the state of known fraud vulnerabilities. Health checkups help identify diseases before they progress, and fraud risk assessments can identify fraud vulnerabilities before significant exploitations occur. Health checkups recommend lifestyle changes and other preventative measures as forms of preventative care; fraud risk assessments recommend adjustments to the internal control environment that could be prioritized.
The Association of Certified Fraud Examiners’ (ACFE) Occupational Fraud 2024: A Report to the Nations reported that, of the occupational fraud cases included in its most recent study, those at organizations that had proactively conducted fraud risk assessments detected fraud 44% sooner and experienced 47% lower median losses. Although this study does not specify how much less frequently fraud occurs within organizations that proactively conduct fraud risk assessments, these assessments can also help inform actions that mitigate the risks and prevent some fraud from occurring in the first place. This ACFE study drew insights from almost 2,000 occupational fraud cases investigated by CFEs between 2022 and 2023, where someone’s occupation was leveraged for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.
Not all fraud risk assessments are created equal though, nor should they be. A mature fraud risk assessment within an organization can look significantly different than a mature fraud risk assessment within another organization. The scope should vary based on a wide variety of factors, such as the organization’s industry, size and risk appetite.
While there is no single solution to fraud prevention, implementing tailored fraud risk assessments is a crucial step in protecting any organization.
By proactively monitoring and addressing fraud vulnerabilities, organizations can not only prevent more fraud but also detect fraud more quickly and reduce the financial impact. Moreover, fostering a culture of integrity and accountability through proactive fraud risk management can enhance overall organizational resilience. Just as regular health checkups are vital for maintaining good health, regular fraud risk assessments are essential for maintaining the financial health and integrity of an organization.
If your organization needs assistance with building out and/or conducting tailored fraud risk assessments, assessing the maturity and effectiveness of your fraud risk management practices, or even more targeted fraud consulting, contact James Rumph in our Columbus office or Tom Pratt and Brian Webster in our Pittsburgh office.
About Schneider Downs Business Advisory
Our experienced team of business advisors, consisting of Certified Fraud Examiners (CFEs), Certified in Financial Forensics (CFFs) and Certified Mergers and Acquisition Advisors (CM&AAs), leverages their industry expertise to maximize value and minimize risk proactively or during acquisitions, litigation, arbitration, corporate reorganization and other major business transactions and transitions. To learn more, visit our dedicated Business Advisory page.
