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Applying Fraud Risk Management

Fraud is a legal concept that refers to acts done intentionally to gain unfair advantage or illegal. Meanwhile, the misconduct is also a broad concept that generally refers to the violation of the law, regulation, internal policies and business ethics. Both, fraud or misconduct within the category of risk that could destroy the company’s reputation and public trust.

But fraud and misconduct would not occur only on the financial crisis alone, but whenever there is an opportunity for. During the control is still lacking, then the perpetrators of fraud will be able to find a gap to do what he wants. Therefore, companies need to implement strong controls. Fraud Risk Management is the solution.

Fraud Risk Management can be divided into 3 categories, namely:
1. Prevention, is control measures intended to reduce the risk of fraud and misconduct actually occurred.
• conduct assessment of the risks of fraud and misconduct that potentially occur
• set a code of conduct, such as a rule of behavior is acceptable in the organization, and other standard
• conduct due diligence in hiring employees, selecting vendors, and related third parties.
• provide training and communication related to the employee fraud and misconduct

2. Detection, is actions designed to uncover the fraud and misconduct
• the existence and mechanism of whistleblowers and hotline
• auditing and monitoring, both to determine whether the organization controls had worked well
• perform data analysis, such as transaction data, operational until the financial

3. Response, the control is designed to take corrective action and repair damage caused by such fraud and misconduct.
• conduct an investigation on the facts that really happened
• apply the discipline, so there are penalties for breaking the rules
• implement transparency in terms of investigation findings
• take remedial action

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