chapter  1
28 Pages

Managing Fraud Risk

Spectacular corporate collapses and numerous major frauds sharply focused on the minds of company directors, owners and regulators on the need to understand and manage fraud risk. Successful management of fraud risk does not solely depend on implementing controls and procedures. It also requires the Board to support initiatives and policies for developing an anti-fraud culture and needs Executives, Business Line Managers and employees to understand their fraud risks. Looking at the many corporate collapses caused by fraudulent behaviour, a hallmark of the victim organisations was that they had not understood fraud risk. Fraud can occur anywhere where there are people who are dishonest, or who become dishonest. A fraud risk comprises three elements: the method of fraud; the effectiveness of controls; the degree of dishonesty and skill level of the perpetrator.