No matter how big or small the company, it is always vulnerable to fraud. From the smallest of starter businesses to the largest of established corporations. Fraud may cause losses of at least 5% to 10%. Industries incur significant losses and setbacks due to fraud each year. Nearly 35% – 45% of the fraud cases were related to private sector companies. Approximately 30% of the frauds were reported from public offices and 15% in government agencies, with only 8% from non-profit organizations. The medial loss of fraud was around $24,000. Could your business handle a $24,000.00 loss due to fraud?
Some companies are more prone to fraud and top the vulnerable list. Some examples of these companies and businesses are stated below:
Fraud affects every industry at some point in time but in different ways. For example, there are vigilant departments in larger companies and industries to track fraud attempts, while smaller companies might not have this capacity.
- Banking & Finance Industry: the banking and finance services face fraud often. Last year, 17% of the fraud cases were reported from the banking and finance industries. The fraud ranges from cash stealing and larcenies to unauthorized check payment and check kiting. The frequent use of credit cards, plastic money, and online payment methods has given rise to electronic fraud.
- Government Sector: Government offices and services are extremely vulnerable to fraud-related discrepancies mainly due to the number of employees. The next highest number of cases of fraud were reported from the government sector at nearly 10%. Government offices fall prey to every other kind of fraud, including billing fraud, purchasing of substandard or low-quality products, expense reimbursement fraud, asset misappropriation, and payroll fraud.
- Manufacturing companies: Manufacturing companies have a high risk of fraud ranging from 10% – 12%. Non-cash frauds are more frequent and include stealing products and goods from employees or visitors, inappropriate use of company goods, and billing fraud. In addition, reimbursement fraud is common and occurs due to sales forces and territory sales managers’ misconduct.
- Healthcare Industry: Healthcare businesses are prone to billing schemes that account for 35% – 40% of fraud. The healthcare sector is run most of the time through insurance companies. People get to spend more as they age, and hence the chance of fraud increases. The average amount of fraud that happens within the healthcare industry is around 7%.
- Educational institutions: Educational institutions account for 7% of frauds. The most common kind of fraud that occurs in the educational industry relates to educational loan exemptions, billing, and reimbursement schemes. Corruption, skimming, and payroll fraud are also prevalent.
- Retail Industry: The retail sector encounters almost 6% of fraud cases. The most common type of fraud that occurs in the retail industry is inventory theft and cash stealing. However, the overall rating of fraud in this sector is lower than the others.
How to be protected from the risk of fraud?
As every industry faces the threat of fraud, it is important to be as protected as possible from fraud. Companies should plan and implement safeguards to mitigate risks and prevent fraud and financial loss.
It should be a top priority for all companies to adopt internal and external controls to overcome fraud threats. The mechanism to detect and identify fraud should be customized to your specific business as different companies and industries are prone to different kinds of fraud. With the help of technology, companies have tightened controls over the threat of fraud. From getting purchase orders to clearing payments to vendors, each process is being checked and verified. Companies are advised to spend time and money on training their employers to observe any kind of fraud attempt that they observe.
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