Directors urged to strengthen fraud-prevention measures


3 Dec 2009

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A new report launched today has called on company directors to take action to ensure that they are taking appropriate steps to combat fraud.

Fraud Alert is a joint initiative between PricewaterhouseCoopers (PwC) and the Garda Bureau of Fraud Investigation (GBFI), the specialist agency within An Garda Síochána dedicated to this area.

The report sets out how directors and managers can strengthen their defences against the risk of fraud.

Recent PwC research revealed that fraud and its associated cost is a growing issue in Irish business.

Apart from the financial loss, there is also the real potential for reputational and other damage to business such as loss of commercially sensitive information and damage to staff morale and customer relationships.

No organisation is immune

“Directors need to be aware, more than ever, of their responsibilities for fraud. The more challenging economic circumstances recently have led to increased vulnerability to fraud in all organisations. The reality is that no organisation is immune to fraud,” said Bob Semple, partner, PwC.

“Directors have a special role to play in fighting fraud. Ultimately, the most important role is in demonstrating an appropriate ‘tone from the top’. This must reflect their determination to operate to the highest ethical standards. After that, the board needs to oversee effective implementation of preventive and detective safeguards,” he said.

“This document highlights the more common types of fraud coming to the attention of An Garda Síochána. It delivers excellent fraud-prevention advice to a broad section of the community including directors, managers, staff and individual members of the public,” said Garda Síochána Commissioner Fachtna Murphy.

“In recent years advances in technology and the internet have provided a new arena for business. These advances have also, regrettably, provided opportunities for the commission of fraud-related crime. The challenge for law-enforcement agencies, in partnership, with business and local communities is to ensure that adequate measures exist to combat this threat,” he added.

Seven steps directors should take to prevent fraud

1. Understand their legal responsibilities.

2. Establish an ethical "tone at the top".

3. Establish preventive measures – preferably by drafting a "fraud alarm" tailored to the needs of their organisation.

4. Ensure identified risks and weaknesses in internal control are rectified promptly.

5. Prepare an "incident response plan" that will allow the organisation to react decisively should a fraud be uncovered.

6. Implement appropriate whistle-blowing procedures.

7. Ensure the board gives appropriate attention to fraud at board meetings.

“The reality is that fraud costs everyone. Organisations should develop robust compliance systems to reduce the risk of fraud in the first place. They should also consider implementing whistle-blowing arrangements appropriate to their needs as a safety valve in the event that other established controls fail,” Semple said.

Photo: Launching Fraud Alert, a joint initiative between PwC and An Garda Siochana, are Bob Semple (left), partner, PwC, and Fachtna Murphy, commissioner, An Garda Síochána

Photo by Robbie Reynolds/ PR

Article courtesy of businessandleadership.com