Download - 2012 protecting your business
Protecting Your Business: Who’s
Profit is it Anyway?Fraud Prevention for Business Owners
“Providing businesses the prescription for enhanced profit”
Alan Greggo CPP, CFE
• Consultant
• Author
• Senior Loss Prevention Leadership
Fred’s Story
“It’s Not My Problem!”
• Did you know the typical organization loses 5% of its revenues to fraud each year?
• Applied to the 2011 Gross World Product, this figure translates to a potential projected annual fraud loss of more than $3.5 trillion.
“It’s Not My Problem…Is It?”
• The median loss caused by occupation fraud cases in the ACFE study titled the “Report to the Nations”, was $140,000 and 1/5th of reported cases caused losses of at least $1 million!
Understanding Fraud
Opportunity
Pressure
Capability
Rationalization
The Fraud Triangle
Behavioral Red Flags of Perpetrators
Living beyond means- 35.6%
Financial Difficulties- 27.1%
Unusually close association with vendor/customers- 19.2%
Behavioral Red Flags of Perpetrators
Wheeler-Dealer Attitude- 14.8%
Divorce/family problems-14.8%
Control Issues, Unwillingness to share duties- 18.2%
Behavioral Red Flags of Perpetrators
Irritability, suspiciousness or defensiveness- 12.6%
Addiction problems- 8.4%
Past Employment- related problems- 8.1%
Behavioral Red Flags of Perpetrators
Complained about inadequate pay-7.9%
Excessive pressure within the organization-6.5%
Refusal to take vacations- 6.5%
Oh-My!! I’ve seen these!
• Red flags by themselves don’t mean an employee is making a bad choice about your business.
• When you start to see patterns forming or multiple red flags, ensure your fraud controls are being adhered to and watch for unusual behavior.
• Don’t confront an employee head on without evidence of wrong doing; get help from an expert investigator.
Most employees want to do well
• Be aware of Goal Incongruence
• Which is: Management setting lofty targets and goals and expect the employee to achieve them at all cost. The employee feels their future, their job is on the line.
• Employees want to succeed and please their manager and the company.
• If the outcome looks hopeless, the employee starts to rationalize (see fraud triangle).
CFE/ Investigator Wisdom: For FREE
• People only comply with rules they think are fair!
CFE/ Investigator Wisdom: For FREE
• Trust is not and internal control!
The indictment seeks $53 million and numerous assets, many of which were seized from Crundwellwhen she was arrested by FBI agents on April 17.
Here's a laundry list of what the government wants:Two residences and the horse farm in DixonA home in Englewood, Fla.A $2.1 million luxury motor homeMore than a dozen trucks, trailers and other motorized farm vehiclesA 2005 Ford Thunderbird convertibleA 1967 Chevrolet Corvette roadsterA pontoon boatApproximately $224,898 in cash from two bank accounts
CFE/ Investigator Wisdom: For FREE
• Anytime you change a system, people will always change their behavior; What’s possible?
• If you want people to do the right thing you have to make it personal.
Protecting Your Business- Physical
Controls
• Pre-employment background checks
• Policies on dishonest and unethical behavior
• Supported from top management?
• Business Abuse Hotline; anonymous way to report suspected violations of the ethics and anti-fraud policies
• Restricted access to areas containing sensitive documents
• Maintain a system for providing an audit trail
Protecting Your Business-Physical
Controls• Restricted access to computer systems
(accounting software, inventory, and payroll)
• Restrict access to areas with high value assets (shipping, receiving, storerooms, and cash)
• CCTV and recording equipment to monitor physical building and sensitive areas
Protecting Your Business-Physical
Controls• Conduct random, unannounced audits of
inventory, cash, expense, purchasing, billing, etc. by internal or external auditors
• Prompt investigations of reported incidents of fraud
• Educate employees about the importance of ethics and anti-fraud programs
Active social networkers
• As a group, more likely to experience pressure to
compromise ethics by 32%.
• 56% of social networkers experience retaliation
versus only 18% of less active or non‐active
networkers.
Top 5 IT Security Best Practices for
Small Merchants• Understand sensitive data, where it is and who is
responsible for its protection.
• Avoid storing sensitive data; if required to do so, secure it.
• Protect perimeters with firewalls.
• Fortify interiors with people, procedures and technology.
• Get to know service providers and their level of PCI compliance.
*From a white paper published by payment security and compliance solutions provider ControlScan
The tools of Business Ethics
• Ethics programs.
• Foreign Corrupt Practices Act.
• Federal Sentencing Guidelines.
• Sarbanes‐Oxley.
• Industry Specific Regulations.
• Dodd‐Frank.
“Asset protection is more than just stopping shoplifters, it sets the stage for an ethical corporate culture.“-Stephen Sadove, chairman and CEO of
Saks Inc.
7 Principles of Business Ethics
• Be Trustful.
• Keep an open mind.
• Meet obligations.
• Have clear documents.
• Become community involved.
• Maintain accounting control.
• Be respectful.
Questions?
Alan Greggo
Easy Risk Assessment- 11 questions to consider about your business: http://profitrxllc.com/pages/RiskAssessment
Phone: (513) 236-2642