How do you know if your business is a target for fraud? How much would the impact of fraud cost your business? What are different types of fraud you should be aware of? Out of 5,000 companies surveyed in 2020, 47% experienced fraudulent activity within a two-year period. This article outlines the serious risks of commercial fraud and provides steps to identify and prevent business fraud.

Understand the risks.

It’s important to understand the risks relevant to your business when examining the threat. Fraud can happen in many ways, such as cybercrime, ransomware, training issues, and system compromises. Examples of risks that lead to fraudulent situations include:

Hardware vulnerability.

Weakness in a computer system can lead to a ransomware attack. Ransomware is a program that encrypts your company’s data until you pay a ransom. This is one of the largest types of cyber fraud in 2021.

Unauthorized access to email.

Business Email Compromise (BEC) is when an unauthorized person can access your company email and use the information to trick employees into making fraudulent financial transactions.

Theft.

Do your customers visit you in person or exclusively online? Online businesses are more susceptible to digital fraud like identity theft. Physical stores need to be cautious about fraud, including, employee theft, credit cards, and grey market items.

Training failures.

Employees can be tricked by social engineering attacks and phishing emails. Train your employees on how to protect themselves from common threats. Employees also need to be trained on ethics and on your policies. Education is often your most valuable tool in combating fraud.

Mitigate risks of business fraud.

Some risks are unavoidable, but there are ways to lower the financial impact and reputational risk of fraud. Measure and reduce the impact.

Fraud can be analyzed two ways. The first is the likelihood of the fraud occurring.  Frauds like phishing emails are more likely to occur than employee theft in many companies. It is important to focus your energy appropriately on  fraud that may most likely occur. The second way we analyze fraud is by the size of the impact. Impact comes in many forms. It could be brand damage or financial loss.

When evaluating the impact of fraud, ask questions such as these:

• How many systems do certain types of fraud affect?
• Is there lasting brand or reputational damage?
• Is customer data exposed by specific fraud that could then lead to a loss of trust in your company?
• Can your company quickly recover from  fraud of a certain type?

Answers to these questions  will help you develop ways to safeguard your company against threats. It is important to focus on the types of fraud that are both most likely to occur and most likely to cause lasting damage to your company.

Smart companies conduct annual assessments to identify new risks. These assessments are often conducted by a third party. A third party can be objective when evaluating your risks. Typical types of risks include employees, point-of-sale systems, and the technology your company uses.

Key takeaways for your business.

Fraudulent activity happens every day. Technology-enabled businesses are more susceptible than ever. To assess business fraud, start by identifying your business risks. Understand where your organization could experience fraud.

Next, identify how much certain types of fraud could cost you and how likely they are to occur. Cover your business with appropriate insurance. Then, work with your employees to help monitor fraud. Build an informed workforce through training. Remember, you can’t eliminate the risk of fraud but you can plan and safeguard yourself against it. For more information, please visit Popular Bank’s fraud prevention services.