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ERM: Should Internal Fraud Mitigation Top the List?

Tim Williams's Profile

I  am always looking at ways to more effectively manage risk across the enterprise and that includes identifying and mitigating emerging risks.

In general, as companies change and move across new borders, at times it is challenging  to keep internal fraud, and risks from internal sources, top of mind. I attend ERM webinars and seminars and very few, if any focus on internal risks.

I am curious as to how others use process and leverage technology to identify and mitigate internal risks.

What brought this "top of mind to me"? I recently read an article that discussed the results of the most recent Kroll Annual Global Fraud Report. The 2011 finding included that  60 percent of frauds are committed by insiders, which was up from 55 percent last year.

Answers

Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

For smaller enterprises, internal employee fraud involving cash should be a very high priority focal point. For large entities, fraud considerations should focus proportionally more on management accounting practices, the potential for collusion with 3rd parties, and violations of lwas such as the Foreign Corrupt Practices Act. Non-fraud considerations should focus on procure to pay, complex areas applicable such as income tax compliance and accounting, fixed asset accvounting, debt and investment management, and inventory accounting for manufacturers, loan and loss estimation for financial institutions, and the like.

Mark Rome
Title: CFO
Company: Empower2adapt
LinkedIn Profile
(CFO, Empower2adapt) |

Risk oversight must start with senior executives, officers and directors. Recent reports (The Conference Board, Lehman Brothers' examiner, etc.) suggest that a failure of corporate oversight was a leading contributor to the financial crisis. Risk oversight will go nowhere within any organization, large or small, without leadership and the board getting serious about corporate oversight – governance, risk oversight and compliance. Success will require leadership and diligence, not just lip service. I suggest educating leadership and the board on exactly what risk oversight is, and why it is so important.

Nancy Tso
Title: Head of Client Service
Company: SkyStem
(Head of Client Service, SkyStem) |

Hi Tim
This might seem very basic. But it's been proven time and again that having a rock solid hot line (and the process that goes with handling inbound messages/calls) is still the best way to detect internal occupational fraud. Here is a post my colleague wrote a while back. And if you take a look at ACFE's most recent Report to the Nation, the statistics will reflect more or less the same.

http://backofficemechanics.com/2010/11/16/fraud-refresher-four-tips-to-boost-fraud-detection/

Hope this helps. Nancy

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