The South African economy remains mired in political uncertainty, policy shifts and a lack of any real growth.
Fraud and Corruption is dominating headlines almost daily, and the thinking around managing fraud and corruption risks to preserve stakeholder value has become increasingly critical in informing business decisions.
Economic downturns and low growth put more pressure on executives and employees, thus increasing the likelihood of good people doing bad things, like committing fraud.
The Association of Certified Fraud Examiners (ACFE) Report to the Nations 2017 showed once again that whistle-blower tips were the most common method of detection of fraud and corruption cases in sub-Saharan Africa standing at 37,3 percent.
The report also shows that the financial services sector was the most affected by fraud and corruption, with credit and debit card fraud costing South Africa more than R600 million a year. The financial services sector is followed by the public sector and the small business sectors respectively in second and third place.
This year’s International Fraud Awareness week takes place from 12 to 18 November 2017, and Deloitte has joined the ongoing global efforts against financial crime, fraud and corruption by providing its expertise throughout the African continent to support businesses to mitigate against these risks.
“When fraud and corruption occur in an organisation, it can cause irreparable damage to the company’s reputation,” says Gregory Rammego, Forensic leader within Risk Advisory Africa at Deloitte.
“Risk can also arise from organisations not adhering to regulation aimed at fighting fraud and corruption, and failure to comply can expose entities to significant penalties, reputational damage, reduced competitiveness, negative customer experiences and even the loss of operating licences.”
Rammego adds that, “Whilst it is currently not possible to eliminate fraud entirely in an organisation, the right prevention and detection measures can significantly mitigate the likelihood of fraud occurring. Organisations can increase their fraud prevention efforts through continuous communication and reinforcement.”
According to Deloitte, common improvement opportunities in fraud prevention and detection include:
- Ethics awareness and training
- Improving employee fraud awareness training
- Re-prioritising fraud detection efforts onto key fraud risks
- Greater use of technology to enhance fraud detection and deterrence such as forensic data analytics and predictive analytics
- Enhanced due diligence on customers and suppliers
- Employee screening and background checks
- Benchmarking fraud helplines/hotlines to uncover performance issues.
“One of the outcomes of a fraud risk assessment is a prioritisation of fraud risks. Figuring out where your business is and where it needs to be is half the battle. Too often, companies fail to put a fraud prevention and response plan in place and are caught off-guard at a time when prompt action is needed,” says Rammego.
Deloitte assists organisations in understanding their fraud risk universe and putting together a comprehensive plan to manage the risk.
Strong fraud risk management has become a business strategy. In our experience, organisations which implement detailed fraud risk management processes can also experience related benefits, including:
- Reduced financial losses
- Enhanced ethical culture
- More effective corporate governance, improved reputation and public confidence
- Reduced cost of responding to fraud (investigations, legal costs, and regulatory enforcements)
- Compliance with legislative requirements such as PRECCA, FCPA, UK Bribery Act.
South Africa suffers from widespread corruption with public procurement being a significant risk for businesses.
Fraud Awareness Week presents leaders across all industries with an opportunity to emphasise the importance of fraud prevention within their organizations.
Companies need to actively encourage employees to speak out when they suspect illegal activity and to provide platforms where employees can report these incidences anonymously without fear.
For more information on how you can mitigate fraud risks for your business go to https://www2.deloitte.com/za/en/services/risk/fraud-risk.html?icid=nav2_fraud-risk