Fraud can have a major impact on many businesses, but few are prepared for its impact. Here’s how it could affect your organisation.
Fraud is a complicated thing to define. There are all sorts of different types of fraud in law, from bankruptcy to healthcare. However, they all have one thing in common: someone intentionally lying or misrepresenting something in order to deceive you. This could be someone paying with a fake check, taking your money in exchange for a good or service that they never provide, or any number of other scams.
This can have a big impact on you and your business. Not only is there usually a financial loss, but you might also find you’ve taken a hit to your reputation. It can affect how your company works as you take measures to prevent similar incidents. It can even harm your overall industry if fraudsters can gain a foothold and get an advantage over legitimate businesses.
Learning how fraud can impact you is a great start to protecting your business. Once you understand the effects the crime can have, you will be more aware of how it can occur and what steps you can take to keep yourself safe. Here are some of the ways fraud can affect your organisation.
Generally, the main impact of fraud is financial. Fraudsters generally are committing the crime to profit from it, which means they’ll be trying to extract money from your business. PwC found that nearly 40 percent of businesses with less than $100 million in revenue experienced fraud in 2021-22, and nearly a quarter of those lost $1 million or more.
This doesn’t just cost you money, it also impacts how you do business overall. For example, a third of small businesses have experienced credit card fraud. In the wake of this, it might be necessary to rethink your payment system or processes, potentially even changing the way you take payment altogether. Not only is this costly, it can also be a big time sink.
Then there’s the reputational impact. Businesses are not the only victims of fraud, and consumers are increasingly wary of getting scammed. They might avoid your company if they find you are a victim of fraud, as they do not want to risk the same thing happening to them. They might even view you as less secure or safe than your competitors.
How can you prevent fraud?
Fraud prevention is a complicated topic, but there are some things you can do straight away to help protect yourself. For example, the first step you can take is to educate yourself on the different types of fraud that could impact your industry. Some scams are more common than others depending on your business, so read up on what your biggest risks are.
You can take some simple steps to guard against some of the more common types of fraud. Check fraud is common, so it can be a good idea to purchase secure checks that are protected against forgery. This prevents fraudsters from making purchases using your business’ funds.
Make sure you’re protecting yourself online as well. Cybercrime is a common type of fraud, so ensure every aspect of your business is encrypted and resistant to hacking. This is especially important for financial information and customer data, so consult with professionals to make sure these are safe.
While the overall business will be impacted by fraud, every company is made up of individuals who can be harmed by the activity. The people who can be impacted vary, but generally these people will be the first to be affected:
- CEO/business owner – as the person responsible for the business overall, any fraud will require them to react and make decisions for the company’s future.
- Head of finance/accounting – fraud is generally financial, so the finance department will need to account for the loss and work to reduce its impact across the business.
- Floor workers – a large chunk of fraud happens at the checkout of retail businesses. Often, there is little an employee can do to spot fraud but feeling responsible can cause a lot of anxiety.
While fraud is common, and can be devastating, it is not impossible to prevent. Learning about it and taking steps to protect yourself will go a long way towards ensuring you don’t fall victim to scams.