One in three businesses is a victim of fraud, will yours be next?

What factors contribute to multiple fraud incidents occurring within a business?

The results from MNP’s recent survey show that businesses that experienced financial fraud in the past perceived it as a higher risk than those that did not experience a fraud incident. These businesses are more likely to take a stronger stance against fraud in the future.

However, some businesses believe that fraud won’t occur in their organization again once they have uncovered an incident. In a 2021 survey by MNP, 10 percent of survey respondents that experienced fraud did not take any measures to prevent another occurrence within their business. This number dropped to three percent in MNP’s 2024 survey.

It is encouraging to see that more businesses are willing to implement stronger measures and controls. However, many organizations fail to relay the appropriate message after a fraud incident occurs. According to MNP’s survey, a financial fraud results in a layoff or dismissal in less than 40 percent of cases. Additionally, fewer than a third of businesses will file a criminal complaint with the police, perform an investigation, or take legal action.

Several organizations still take inadequate measures to prevent another incident of fraud from occurring in the future. For example, only 27 percent of impacted businesses provided anti-fraud training for employees and management after an incident of fraud was discovered. A mere 14 percent performed a fraud risk assessment, which can help identify potential vulnerabilities and fill the gaps that leave organizations at risk of another incident of financial fraud.

This combination of failing to take action or implementing inadequate measures in the wake of a financial fraud leaves businesses vulnerable to future threats. These factors contribute to financial fraud occurring multiple times within a business.

How can you prevent your business from becoming a victim of fraud (or a repeated victim)?

Financial fraud is an ever-present risk — and it is impossible to fully reduce the risk of an incident occurring within your business. This holds even more true if a financial fraud incident has already occurred in your organization. However, there are some steps you can take to reduce the risk of your business becoming a victim or a repeated victim of financial fraud, including:  

Be vigilant during periods of disruption

Significant shifts in the business environment increase the risk of financial fraud. These shifts can be internal — such as a merger, acquisition, or divestment that changes your organizational structure. This can create gaps in oversight that provide the opportunity for financial fraud to occur.

Sixty percent of survey respondents believe that the current economic environment either did not change the risk or decreased the risk of fraud. However, external shifts in the economic climate can also leave your business vulnerable. Factors such as rising costs or supply chain disruptions can divert the attention of your management and leadership team. These factors also create significant financial pressures that increase the risk of both internal and external fraud.

Resist complacency

According to the results of MNP’s recent survey, employees with longer tenures were less likely to rate fraud as a high risk. Familiarity can lead to complacency — and prevent you from reviewing and updating the policies, procedures, and controls in place to prevent fraud.

However, while familiarity can encourage complacency, it also positions you to detect when something is amiss within your business. Fraud is often discovered because something doesn’t seem right, although the business is running smoothly. It is important to stop and take a critical look in these situations. Remaining vigilant and trusting your instincts can help support the earlier detection of fraud incidents.

Act accordingly

It is crucial to act immediately when you suspect something is amiss within your business — and remain vigilant for signs of financial fraud during periods of disruption. As mentioned above, failing to demonstrate the appropriate attitude and messaging towards financial fraud and failing to take action when a fraud incident occurs leaves your business vulnerable. You must provide the correct message and then perform appropriate follow-up measures concerning deterrence to reduce future fraud risk within your business.

Take the next steps

Discover more insights in our whitepaper Misconceptions about fraud risk pose significant threats to Quebec businesses. This report analyzes the results of our survey — and provides insights and tips from our Forensics and Litigation Support Services team to help reduce risks to your business.