Why The Fraudster Targets Success

All areas of finance attract the attentions of the unscrupulous fraudster. They will look at big businesses, smaller concerns and private individuals. The largest concerns will have the most to lose, and there is a greater chance that losses will go unnoticed for a longer period of time.

More and more businesses are appreciating the need to defend themselves from the threat of fraud. They are beginning to realise that not a lot of extra work needs to be carried out to vastly reduce the risk of losses from the fraudster's attention. But there are many people still, including managers of the biggest concerns, who are compacent when it comes to reviewing their risk to fraud.

When fraud investigations are conducted by a forensic accountant or by forensic accountancy firms it is often too late to save the business from losses which have already taken place. Often a company will lose so much that its very health and ability to trade is threatened. Often the company is brought down and the resulting losses are investigated by the insolvency practitioner. The advisable course for a developing business to take is to have an expert review its anti fraud defences on a regular basis.

The fraudsters will often target businesses that are recently successful. Businesses that have grown rapidly, or smaller concerns that have merged, sometimes do not attend to the additional risks of fraud immediately. The growth period of a business is the time when it is most vulnerable. For example, individual managers of departments may be in control of their small area, but the way in which the divisions interact may not be developed immediately and gaps in the financial controls emerge. Most businesses address these problems eventually as the business gets used to its new and busier operations, but the time lag can be long enough for the fraudster to seize the opportunity.

All change processes in a company can mean extra risk, and fraud is often the last that is considered. It is the time when temptation causes the otherwise mostly honest employee to seize an opportunity, especially if they feel threatened by the changes that are taking place. The success and growth of a business weakens its defences to fraud. There is a bigger target often with a defence system suitable for the original small concern. The growth necessarily creates new processes and a new framework for dealing with finances, with an increasing number of vulnerabilities that all need protection. Ignoring fraud threats can mean that any effort to grow a business has been wasted as additional earnings are erroded away. The managers of any successful business must make sure the development of its fraud controls matches the increase in turnover.

Mark Jenner is a Fellow of the Institute of Chartered Accountants in England and Wales, a Certified Fraud Examiner and has a Masters Degree in Fraud Management. He runs his own business as a forensic accountant and fraud investigation specialist.