business ethicsfraud

Stay Ahead of the Game: Recognizing Fraud

By October 23, 2015 No Comments

When was the last time you took a good look at your company’s finances?

Studies show that most major companies report an incident of fraud every two to three years.

Fraud word cloud

Fraud word cloud

In reality, no organization is immune from the risk of theft from within. If you aren’t looking, you probably should be.

In the aftermath of internal fraud, questions fly: How did we miss this? Didn’t we have measures to prevent this from happening? We long to press rewind, to start again. But what if we never press play in the first place? What if we work to recognize fraud before it’s too late?
I often refer to the “Three-Legged Stool” model to show how unethical decisions happen in the workplace:

Leg One is Need. Although many of us would like more money, our first inclination isn’t to steal. But life happens. When the need arises, our thought processes can change.

Leg Two is Opportunity. Perhaps there’s a loophole or a weakness in the system. An employee with a need for financial relief sees this as an opportunity to solve his or her problem.

Leg Three is Rationalization. Without this component, the stool won’t stand. With it, you have a very sturdy seat indeed. It’s just one time. I’ll pay it back.
Rationalization helps us believe that what we are doing is okay.

The key to recognizing fraud is to know when employees are perched on the three-legged stool, and then to help them off. Here are some guidelines to assist you:

Evaluate your corporate policy on fraud.

Encourage open communication within your organization.

Educate your employees on the dangers of rationalization, and train them to notice warning signs in others.

Are you ready to stop internal fraud before it starts? I can help you stay ahead of the game. Let’s talk soon.

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