The Importance of Fraud Awareness Training
Regardless of industry, size, or extent of internal controls, no organization is immune to the potential for fraudulent activity. With fraud schemes becoming more sophisticated, various statistics suggest that fraud risk will only increase in the coming years. As such, fraud awareness training provided on an organizational level has become more necessary than ever. A report by the ACFE indicates that organizations that did not provide fraud awareness training lost nearly twice as much in value as those that did.
Given that fraud can take on many forms, whether it’s payroll fraud, asset misappropriation, vendor fraud, cybercrime, or accounting fraud, significant financial losses are often the unfortunate outcome. The good news is that fraud risks can be heavily combated through offering fraud awareness training to employees of all levels and departments. That is, it is just as critical to train employees as well as their managers on the topic because the ACFE report further indicates that tips about an existing fraud are twice as likely to come from employees who received fraud awareness training compared to those who did not.
Organizations are susceptible to fraud risks coming from both inside and outside the organization, which can have disastrous effects if not mitigated with fraud awareness training. By training employees to recognize the warning signs of fraud, a company can prevent fraudulent activity before it escalates. Employees who are aware of various schemes can pick up on suspicious behaviors, patterns, or even financial transactions that represent fraudulent intentions. Rather than contemplate what actions should be taken, employees can focus on the protocol to take the right actions quickly to minimize the damage of the fraud and accelerate the organization’s recovery. Additionally, when employees understand how fraud occurs, they can personally adopt practices in their role or close the opportunities to prevent fraud from occurring in the first place.
Fraud awareness training further promotes a culture of ethical behavior and integrity in the organization. By promoting the use of the whistleblower hotline, employees feel empowered to report suspicious activity anonymously. Furthermore, employees who receive fraud awareness training ideally take more accountability to defend themselves against fraudulent practices in their role.
While fraud awareness training does require an initial investment, the long-run cost savings are immeasurable, especially when thinking about avoiding common consequences of fraud including legal fines, investigation fees, and the loss of reputation/customers. If you need help with setting up a whistleblower hotline or launching a fraud awareness training program for your employees, we can help.
