There are numerous contingencies that can threaten the health of a business: a liability lawsuit, the failure of a product launch, a natural disaster, an interruption to your supply chain, a labor strike, a partner’s death or serious illness, or the loss of a major client. Your company has probably developed strategies for covering various risks. You purchase insurance, diversify your offerings, put money away for a rainy day. But has your emergency planning included the threat to your company from internal fraud? If an employee was to steal from your company, could you deal with the fallout?
A recent article from Thomson Reuters suggests steps a company should take to develop a contingency plan that covers employee fraud. The steps include:
- Brainstorm fraud scenarios — Assemble your upper management and business process owners to consider how an unscrupulous employee might try to run a scam against the company. Envision as many scenarios as possible.
- Select the most likely fraud scenarios — Many factors contribute to the likelihood of fraud and the type of fraud scheme a bad actor employs. Given the size of your company, your business processes, the type of business you do, and other factors, what fraud schemes should you be most on the alert for?
- Stress-test your internal controls — Examine the potential fraud schemes in light of your internal controls. Could a bad actor breach your controls? Would you be likely to spot the warning signs? Would the scammer be likely to succeed, at least in the short term?
- Contemplate the consequences — What would fraud mean to your company? Could you absorb the financial losses? Would scandal attach? Would the discovery of fraud damage your company’s reputation in your industry leading to additional losses?
- Draft a contingency plan — Now that you know the many levels of threat facing you, put together a plan that addresses each possible contingency. Assign different fraud prevention tasks to various staff and departments.
- Develop policies for fraud investigations — It’s never advisable to develop policies in the midst of a crisis. You should decide ahead of time, as a matter of policy, whether you want to prosecute all incidents of fraud, or simply accept restitution and separate the employee. Policies should be developed in close consultation with your company’s attorney.
After you’ve created and implemented your fraud contingency plan, it’s important to schedule periodic reviews and update your plan whenever circumstances warrant.
Contact Breon & Associates in Harrisburg and Williamsport
For knowledgeable assistance in developing your fraud prevention plan, consult the seasoned professionals at Breon & Associates. With offices in Harrisburg and South Central PA, Breon & Associates provides business, accounting and tax services throughout Pennsylvania, New York, North Carolina and Florida. Call us at 1-888-516-8476 or 717-273-8626, or contact one of our offices online to schedule an appointment.
415 Market Street, Suite #205
Harrisburg, PA 17101
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Camp Hill, PA 17011
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Ephrata, PA 17522
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Wyomissing, PA 19610