Effective fraud management has always been a critical capability within enterprises, and for good reason. The fight against fraud is a never-ending battle that necessitates a combination of strong security, analytics, and risk management, all of which are made possible by technology. Now more than ever, organizations cannot afford to ignore the need for investing in effective fraud management.
Companies lose an estimated 5% of revenue each year due to fraud, according to the Association of Certified Fraud Examiners’ 2020 Global Study on Occupational Fraud and Abuse report. Furthermore, the average period of fraud is 14 months. The longer the fraudulent activity goes unnoticed, the bigger the financial loss.
No one is immune to the consequences of fraudulent activity, whether they are a small business or a giant global corporation. Fraud can be financially damaging to a company and can damage the faith of current and future customers, and the investors in the company.
Effective fraud management
Managing a company’s fraud risk effectively is a long-term process. Any assessment is preferable to none, and the slogan “Do something, start somewhere” is a good one to remember. Businesses should either use an enterprise-wide fraud risk assessment approach or begin with a single business area and gradually expand the program. In any case, assessing fraud risk is not a one-time task.
Organizations should iterate to incorporate lessons learned into future assessments. If they already have a fraud risk assessment strategy, they should look into how they can improve current processes to improve the effectiveness and utility of their present program. If they are starting from scratch, they should focus on one area initially, then leverage best practices and leadership assistance to develop a methodology that’s specific to their company.
Businesses can adopt the below three strategies to address weaknesses in internal controls that can strengthen the fraud risk management program with preventative and responsive control capabilities and better fraud detection.
Leverage ML and AI
To tackle today’s complex fraud risks, businesses should use data analytics powered by machine learning (ML) and artificial intelligence (AI) to detect irregular usage patterns. To drastically increase the effectiveness of the fraud detection, prevention, response, and recommendations process, solutions that leverage AI and ML can replace previous rules- and signature-based tools. In addition, AI and machine learning can provide continuous fraud monitoring and reporting in real-time.
Adopt a security model that is adaptable.
In today’s security context, being able to detect threats as they occur, promptly identify and patch vulnerabilities to avoid threats, and continuously improve security posture is critical.
The Continuous Adaptive Risk and Trust Assessment (CARTA) approach, which is Adaptive Security enabled by Attribute-Based Access Control (ABAC) security architecture, is one strategy proposed by The Gartner IT Security Approach for the Digital Age.
To prevent segregation of security violations and build preventative transaction and master data level controls to avert fraud, the ABAC security paradigm can enable adaptive security with context-aware adjustable rules. In order to combat fraud, ABAC can automate the enforcement of policy requirements at the business process, transaction, and master data level.
Effective internal controls in place
Internal controls are a critical component of any fraud risk management strategy. Businesses cannot manage risk unless they can ensure that they have adequate internal controls in place. Furthermore, it is critical to continuously review the effectiveness of fraud control measures to ensure that residual risk levels remain within the organization’s acceptable risk appetite.
For more such updates follow us on Google News ITsecuritywire News