Business fraud occurs constantly. As seen in stories reported by traditional news outlets and social media, many companies fall victim to the hands of those with deceptive intent. As a business owner or senior-level manager, it’s essential to equip your staff and find ways to manage your assets to protect against the increasingly high risk of fraudulent activity.
Understanding how businesses can protect against hackers, dishonest employees, or external criminals attempting to take advantage of your company can save millions in damages and years of work to resolve otherwise.
Types of business fraud
Business fraud can be caused by dishonesty within an organization or by an outside attack. It most likely involves stealing money or resources and is often seen in industries like construction, real estate, or utility companies, but fraud can occur anywhere. Some common examples include:
- Payroll fraud: One of the most common types of business fraud, this tactic involves falsifying records like timesheets or paying non-existent employees and issuing unauthorized bonuses.
- Asset misappropriation: Another common type of fraud, asset misappropriation occurs most often when there is a failure of checks and balances in place. This type of fraud involves employees misappropriating cash or other assets that are either stolen directly, unauthorized, misrepresented company purchases, or inflating or misrepresenting inventory.
- Identity theft: In this type of business fraud, sensitive information or proprietary assets about a company can be used by those with malicious intent to steal, hack, or otherwise harm a business. Lookalike websites and fake social media accounts impersonating a company are also forms of business identity theft.
- Email hacking: Common examples of this type of fraud include phishing emails sent to a client claiming to be legitimate communication in an attempt to collect sensitive personal data like credit card information.
Aside from these common forms of business fraud, companies are also vulnerable to criminal acts like money laundering, accepting bribes, and other activities that can lead to very serious legal implications.
How to protect your business from fraud
There is no surefire way to eliminate business fraud, but there are some things you can do to mitigate the possibility. Understand your company’s unique risks and potential weak spots so you can establish procedures that will alert you of serious discrepancies in reporting. Another best practice is thoroughly vetting employees and offering training in security and control. Invest in digital and physical security to prevent data breaches and audit your books and inventory at unscheduled yet regular intervals.