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Fraud Risk Management

Fraud Risk Management

Fraud Risk Management

KPMG’s experience for over two decades and numerous fraud surveys have shown that frauds are on the rise. A majority of the organisations surveyed, report having experienced frauds in recent past. All organisations, irrespective of size and sector of operations, face fraud risks. It is a major concern that can have a devastating impact on an organisation’s bottom line, its reputation and even its continuity. Another significant observation is that survey respondents cite fraud prevention environment as a key factor in combating fraud risk. This implies that fraud risks can be mitigated if appropriate fraud risk management framework is implemented.

Fraud risk management is a proactive approach towards fraud and aims at preventing and detecting fraud early on. We at KPMG in India, have developed methodologies which are sector and industry specific and can be customised to your needs. Owing to our immense experience in fraud prevention and detection we can help you tackle the risk of fraud. Our leading services in the area of proactive fraud prevention, detection and response are:

Fraud awareness workshops and trainings: These sessions can help you identify potential fraud indicators in your organisation, and can be designed depending on the audience function, level and management expectations. Tailored to your specific organisation or company, participants learn to directly apply working concepts to their specific situation with concrete, take-away measures and tools to reduce fraud and promote an ethical environment. Training includes expert speakers, video presentations, group discussions and role-play exercises. We have conducted seminars/workshops for the Association of Certified Fraud Examiners, India Chapter; the Institute of Internal Auditors, USA (Delhi Chapter), to name a few, as well as various chambers of commerce, regulators, enforcement agencies, etc.

Fraud Risk Assessment exercise: We assist managements in developing fraud prevention strategies by identifying risks and weaknesses in various processes and evaluating potential gaps in the control framework. Through the use of our in-depth sector knowledge, customised data analytics reports can be generated, results of which are often surprising to the management. Further, a dashboard of anti-fraud controls can be implemented, which can then be monitored via controls testing on an ongoing basis.

Forensic health check: A quick and easy review/basic level diligence procedure for organisations that do not want a comprehensive Fraud Risk Assessment. Sometimes a basic check helps understand the health of the organisation and can provide insights into a more focused and targeted approach.

Organisation perception survey: These surveys are a popular way to gauge your employees’ view on the current risk management programmes and processes prevalent in your company. Such surveys can help the management become aware of their true strengths and weaknesses and help customise and improve their fraud risk management planning.

Ethics helpline/hotline: Our ethics helpline service assists employees as well as third parties associated with an organisation by providing them an independent conduit to report incidents of unethical practices. As per the fraud surveys a whistleblower hotline/Ethics helpline is the number one way to detect and report fraud. It has been observed that such hotlines also become preventive tools over a period of time. For more details on this service, please click here.

Predictive data modelling: Through the use of various techniques (such as our fraud response modules and dashboards) and tools, we can help highlight red flags across various processes. This would thus help in developing an early warning system that can predict and potentially help prevent fraud. We can also create a dashboard that highlights red flags on a real time basis, thereby helping companies in combating potentially fraudulent situations.

Anti-counterfeiting risk assessments: We can assist organisations in developing and implementing an effective anti-counterfeit framework. (For more details, refer to our FRM brochure).

Competition risk management: We can help clients develop an effective framework to ensure compliance with the Competition Act 2002. We assist clients in developing a policy framework, identifying business processes and employees vulnerable to violation of the Competition Act, creating and delivering effective training programmes and developing communication material. For more details refer to our anti-trust brochure.

Case study

Our client is a well-known Indian company in the consumer market sector. The company had grown manifold in the recent years and had aggressively acquired entities overseas and expanded operations globally. Because of its exponential growth, the client wanted us to review their procurement process, one of the key functions for the organisation, across locations for two of their flagship brands.

We performed walk through, site visits and undertook customised data analytics on ERP (Enterprise Resource Planning) data as well as data residing in specialised tools and applications. We also gathered intelligence from the industry. We created an inventory of fraud risks and tested existing controls for design and operating effectiveness. We then recommended new controls that could be implemented to mitigate the risks which were not covered. The issues uncovered included the following:

  • Procurement at rates which were not effective
  • Double payments made to certain vendors
  • Lack of segregation of duties in the procurement function
  • Vulnerabilities in the vendor management process
  • Cases of employees unearthed, who were also vendors to the organisation
  • Farmer suppliers not promised market rates resulting in procurement through intermediaries, increasing the rates as well as complexity in the procurement process
  • Inadequate quality control procedures.

Post our assessment, the client was able to take steps towards addressing all the issues stated above. We then designed a control framework for them, which was both easy to implement and cost effective. We also conducted workshops with the operations team, to help them understand and agree on the required controls framework.

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