Your company probably has a contingency plan for such potential calamities as fires and natural disasters. But what about a fraud contingency plan? Even if you do not believe that one of your trusted employees would ever steal from you, it pays to be prepared. A comprehensive fraud contingency plan can help facilitate an investigation and limit financial losses.
Imagine the possibilities
No contingency plan can cover every possibility, but yours should be as wide-ranging as possible. Work with your senior management team and financial advisor to devise as many fraud scenarios as you can dream up. Consider how your internal controls could be breached — whether the perpetrator is a relatively new hire, an experienced department manager, a high-ranking executive, or an outside party such as a vendor.
Next, decide which scenarios are most likely to occur given such factors as your industry and size. For example, retailers are particularly vulnerable to skimming, and small businesses without adequate segregation of duties may be at greater risk for theft in accounts payable. Also identify the schemes that would be most damaging to your business. Consider this from both a financial and a public relations standpoint.
Put people to work
As you write your plan, assign responsibilities to specific individuals. When fraud is suspected, one person should lead the investigation and coordinate with staff and any third-party investigators. Put other employees to work where they can be most effective. For example, your information technology manager may be tasked with preventing loss of electronic records and your head of human resources may be responsible for maintaining employee morale.
You also will want to define the objectives of any fraud investigation. Some companies want only to fire the person responsible, mitigate the damage, and keep news of the incident from leaking. Others may want to seek prosecution of offenders as examples to others or to recover stolen funds. Your fraud contingency plan should include information on which employees will work with law enforcement and how they will do so.
Communicate inside & out
Employee communications are particularly important during a fraud investigation. Staff members who do not know what is going on will speculate. Although you should consult legal and financial advisors before releasing any information, aim to be as honest with your employees as you can. It is equally important to make your response visible so that employees know you take fraud seriously.
Also designate someone to manage external communications. This person should be prepared to deflect criticism and defend your company’s stability, as well as control the flow of information to the outside world.
Review regularly
After you have created and implemented your fraud contingency plan, review and update it regularly to reflect business and personnel changes. Contact us for help making your plan.