What can companies do to mitigate fraud opportunities?

Implementing preventative and detective controls is a fundamental strategy for mitigating fraud opportunities within a company. Preventative controls aim to stop fraud before it occurs by establishing policies, procedures, and checks that deter potential fraudsters from attempting to commit fraud in the first place. Examples of preventative controls include segregation of duties, employee training on ethical behavior, and background checks during the hiring process.

Detective controls, on the other hand, are designed to identify and uncover fraudulent activities after they occur. This could include regular audits, transaction monitoring, and whistleblower hotlines where employees can report suspicious activities anonymously. By having both layers of controls in place, companies create an environment that not only discourages fraudulent behavior but also enables swift action in response to signs of fraud, thereby protecting company assets and enhancing overall integrity.

The other strategies mentioned, such as ignoring complaints from employees, increasing workloads for staff, and limiting access to financial records, do not effectively address the root causes of fraud nor promote a culture of transparency and accountability, which are critical for reducing fraud risks in an organization.