Organizations need to prepare for fraud arising from new business dynamics has been saved
Organizations need to prepare for fraud arising from new business dynamics
In the last two years, three of the most significant fraud and reputational damage cases reported by the media arose due to social media exposure. These large global brands were questioned by consumers on their quality assurance practices, which upon investigation led to the discovery of noncompliance, malpractice and fraud. In two of these cases, the brands had to recall products from the market resulting in huge losses, and had to invest in brand re-building measures until consumers could regain faith.
Interestingly, these brands remain heavily invested in social media for customer engagement. Yet, they did not foresee the potential risks arising from this platform.
In our experience, large organizations in India continue to be saddled with legacy practices and tend to remain fixated on them—whether it is for business process improvements or fraud risk management. So, while one may see a very robust fraud risk management framework to prevent, say, procurement fraud, there may be little or no steps taken to anticipate potential fraud in adopting e-procurement models. In theory, while e-procurement may not pose the same fraud risks as a conventional procurement process, and may be touted as the ‘fraud free’ frontier for the procurement function, practical experience can show otherwise. For instance, our India Fraud Survey, Edition II (2016) indicated that the procurement function is considered the most vulnerable to fraud by large companies as well as by small and medium enterprises.
Further, in the past, organizations were aided by relative inaction from governments to bring about paradigm change in the way business was conducted. However, that appears to be changing today. The last two years have indicated a determination on the government’s part to ensure ease of conducting business—whether that is by moving towards simplifying laws and tax structures or by pushing for cashless transactions. In such a scenario, organizations will experience new frauds, unless they proactively anticipate them and establish processes to mitigate these frauds.
You can read more about the changing fraud risk landscape here.