What is the impact of financial crime and how can you reduce risks to your business?

What happens after a financial crime occurs?

Forensic accountants and law enforcement respond to scenarios such as the one described above on a weekly if not daily basis. Victims of financial crime suffer significant psychological and physical stress that may impact their own health, as well as the health of their family members and employees. Financial crimes are committed by people in a position of trust — and that betrayal weighs heavily on the victims.

Financial crime has a significant impact on your:

1. Business — Businesses victimized by crime are at a high risk of bankruptcy. The stress and depression of trying to recoup your life after experiencing financial crime can be devastating.
2. Personal health — Victims of financial fraud often suffer from depression, anxiety, and general health issues as they try to rescue their business and personal life. Several studies indicate that personal debt poses a significant risk to both physical and mental health.
3. Reputation — An employee’s fraudulent actions can make your clients concerned about their personal data, the health of your business, and its long-term viability. Businesses that are already suffering from the financial losses of crime may be further victimized through losing the trust of the community.
4. Unintended victims — Family members and employees are the unintended victims of financial fraud and are also one of the largest unreported victims of financial crime. While they may not be directly involved in the management of the organization, they may lose their livelihood and suffer from fear, depression, loss of income, and stress.

 How can your business reduce the risk of financial crime?

Prevention

Prevention involves implementing strategies within your organization to reduce the incidence of fraud. This includes strategies to identify risks, enhance employee training and education, maintain good internal controls, and institute and monitor policies and procedures.

Ensuring that your business has the right anti-virus software, malware detection, and employee training can lower the incidence of victimization by cybercrime. Additionally, implementing controls that monitor, protect, and predict financial crimes can help reduce the impact.

Detection

Detection is the process of mitigating the fraud attempt. It is crucial to identify when an attempt may be made as early as possible to mitigate both the financial losses and impact on the victim. Detection may be electronic or may be through providing the education your employees need to identify fraud attempts.

Response

Response involves ensuring you have the right people and processes in place to deal with the matter quickly and seamlessly. However, sometimes the response to fraud may revictimize those who have experienced financial crime — and it is important to get the right support to help you navigate the process.

These are a few of the difficulties that you may face when responding to financial crime:

• Criminal justice system — The criminal justice system can often feel like an insufficient remedy to financial fraud. It is intended to punish the offenders and does not generally provide a recovery mechanism for financial crimes to satisfy victims. Victims often feel frustrated by the duration and results of criminal courts. While it may be satisfying to take the offender to court, it is often not the best remedy for your situation.
• Insurance coverage — Insufficient insurance coverage can seriously impact your recovery. Businesses often have coverage to protect against damage or fire but are insufficiently protected against employee malfeasance. It is critical to ensure you not only have adequate insurance to cover your loss, but also the right professionals to quantify the loss.
• Stress management — Critical incident stress management is often overlooked. The HR professional working for you may not have managed critical incident stress before, and it is important to find the right professional to help you and your team manage the stress of financial crime.
• Cyber recovery — Ensure your digital infrastructure is permanently clear of danger and that any weaknesses are identified and mitigated if the financial crime was committed by a cyber criminal. The cost of cybercrime recovery is increasing as the number of cases rises significantly.

Take the next steps

Victims of financial crime often experience significant and ongoing effects to their physical and psychological health. A strategy to prevent, detect, and respond to financial crime can help reduce risks and mitigate the impact on yourself and your business if a financial crime occurs.

For more information, contact a member of MNP’s Forensics and Litigation Support team. We can help mitigate, identify, and resolve occurrences of fraud within your organization — and provide the litigation support you need to protect both your reputation and assets.