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.
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- 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 account for 7% of frauds. The most common kind of fraud 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 types of fraud in the retail industry are inventory theft and cash stealing. However, the overall rating of fraud in this sector is lower than in the others.
How to be Protected from the Risk of Fraud?
Every industry faces the threat of fraud, making it essential for companies to protect themselves as thoroughly as possible. It is crucial for businesses to plan and implement safeguards to reduce risks and prevent both fraud and financial loss.
To address fraud threats effectively, all companies should prioritize adopting both internal and external controls. The mechanisms used to detect and identify fraud should be tailored to the specific needs of each business, as different industries are susceptible to various types of fraud.
With the help of technology, companies have strengthened their controls against fraud. Each process, from issuing purchase orders to processing payments to vendors, is now being carefully checked and verified. Businesses are also encouraged to invest time and resources in training their employees to recognize and report any attempted fraud they may encounter.
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