In March 2018, I was giving a talk to about 100 entrepreneurs from across the country. The subject was strategic management and gaining competitive edge. The session was quite uneventful until an entrepreneur stood and asked a question. She asked, ” What if your employee steels from you and becomes your competition?”
This question opened an entire can of worms and derailed the session into a new topic. SMEs, especially in low entry barrier industries, face this problem of investing to safeguard their business and at the same time, investing to grow their business.
Fraud can seriously affect the solvency of a business. Whether it be fraud involving money or company secrets, if it goes undetected, it will not only hurt the bottomline but contribute to a negative culture among staff and affect your credibility in the market.
As I mentioned earlier, SMEs have this heavy burden of deciding to invest in fraud prevention or invest in their company’s growth. To me, the greatest fraud risk, is the thought that fraud is not a threat at all.
A good business must always review its policies, practices and systems against internal and external threats. It is also vital for the entrepreneur to identify what constitutes a fraud, and whether it is internal or external. Internal threats can occur in payroll, accounts, materials, tools and recipes while external threats can occur in misuse of cheques, fraudulent use of logos and misrepresentation of brands.
The consequences of fraud can spill over and affect your business in a variety of ways including loss of revenue, increased operating expenses, reduced operational efficiency, inability to meet obligations to employees, suppliers and customers, damage to credibility, confidentiality compromised, public criticism, strategies and plans jeopardized and low employee motivation.
In that session, I focused on the entrepreneurs and I told them to ask themselves these questions and answer them with brutal honesty:
- Do you know fraud is and what types there are?
- What areas in your business are at the greatest risk of fraud?
- What can you afford to lose the least of?
- What is an acceptable loss to your business?
I asked them a total of 10 questions and told them to find the answers. (Readers can email me for the list of 10 questions) And many returned with a policy to safeguard their business. Entrepreneurs understand their business and the importance to protect it.
Entrepreneurs should also be aware of fraud signals.
- Presence of illogical excuses and reasons for unusual events or actions
- Senior staff becoming involved in junior work
- Excessive staff turnover
There are 12 signals altogether and entrepreneurs need to understand and detect these signals. We discussed in detail on each of the signals and how we can gauge. SMEs need to be driven to protect and safeguard their business.