Managing Fraud Risk: A Practical Guide for Directors and Managers

Taking a Risk-Based Approach to Fraud

Overview

Using risk-based principles to manage fraud threats should not be a theoretical box-ticking exercise but rather it should be an integral part of how directors and managers run their organisations. I was particularly impressed by the way that Sharon answered a question that I asked her about fraud risk during our interview. Sharon is deputy CEO of a large financial services group in the Caribbean. This is what she had to say on the subject of risk:

Well you must remember we run a whole financial services group so when you talk about fraud risk it's complicated. You start with fraud from tellers in your retail network, a customer comes to deposit $5,000, they write him a transaction slip for $4,000 and then skim $1,000 and therefore what do you do? You need to put cameras and monitors of some sort in for that type of risk. Looking at the bigger picture, we have a risk- based system and it reports into an area of operational risk. They look at the risk in the environment. You have an audit department that does risk-based auditing and they look at the area of fraud and where your potential areas of risk are. Then based on that you have to put in place risk mitigation measures and then operational risk monitors to make sure that those measures are in place. The report goes to a senior management Risk Committee so it says: these are the potential areas of fraud, this is what is being done and then if there is in fact a fraud in a particular ...