Managing Fraud Risk: A Practical Guide for Directors and Managers

The Six Key Fraud Prevention Controls

Introduction

For now let us concentrate on the six key methods available to prevent fraud, as set out in the table above. Directors and managers should be aware of them, they should consider their suitability in relation to their own organisation's risk profile and they should be prepared to invest resources where necessary to strengthen existing controls or introduce new ones in order to reduce the fraud threat to acceptable levels.

Preventing fraud, rather than detecting or investigating it, should always be the top priority for directors and managers. It is always difficult, time-consuming and stressful to be forced to react to the consequences of a fraud incident, with all the attendant damage to profits, reputation and morale that this entails. There is much truth in the old saying: “Prevention is better than cure”.

Fraud Prevention – The three Hard Controls

Let us start by looking at the three hard controls: staff vetting; job rotation and/or mandatory vacations; and an anti-fraud policy.

(a) Staff Vetting

Overview

Hiring new people is a risky business. I say this with reference to the true meaning of the word risk, because new hires present both opportunities and threats to an organisation. The subject matter of this book means that we will inevitably focus on the threats here, on the downside risk, but it is important to say that working with good people is often given as the key to success by CEOs and business commentators alike, rightly ...