Fraud Risk Management
All organizations are subject to fraud risks. Large frauds have led to the downfall of entire
organizations, massive investment losses, significant legal costs, incarceration of key individuals,
and erosion of confidence in the market. Frauds by key executives has negatively impacted the
reputations, brands and images of many organizations around the globe. Regulations such as the
U.S. Foreign Corrupt Practices Act of 1977 (FCPA), the 1997 Organization for Economic
Cooperation and Development Anti-Bribery Convention, the U.S. Sarbanes-Oxley Act of 2002,
the U.S. Federal Sentencing Guidelines of 2005 and similar legislation throughout the world
have increased management’s responsibility for fraud risk management.
As part of an organization’s governance structure, a fraud risk management program should be in
place including a written policy (or policies) to convey the expectations of the board of directors
and senior management regarding managing fraud risk to all the employees of the organization.
Fraud risk exposure should be assessed periodically by the organization to identify specific
potential schemes and events that the organization needs to mitigate. As organizations increase
their focus on risk, they should take the opportunity to consider, enact and improve measures to
detect, deter and prevent fraud.
Building an effective fraud risk management program requires solid understanding of how and
why fraud is perpetrated.
Today about 5% of revenue of a typical organization lost to fraud each year and the estimated
global annual fraud loss is $3.7 trillion.
Fraud Response Management Plan -