29 Jul 2020 Ankit Chadha

COVID-19: Deploying Fraud Risk Management To Combat Fraud


The outbreak of COVID-19 pandemic has given rise to a new threat: frauds, which target vulnerable individuals and organizations alike to take advantage of this terrible humanitarian crisis for fulfilling propagandas. All organizations must stay vigilant and develop robust procedures to impede fraud in such challenging times. 

Across all sectors and industries, consumer markets have been severely impacted as strict lockdowns have caused economic activities to come to a standstill. Fading demand for non-essential products and disturbances in material supplies have put immense pressure on the profitability and cash flows of most organizations. In the wake of the coronavirus pandemic, as salary cuts and job losses increase, the purchasing power of consumers is getting highly restrained, which is resulting in a steep demand drop for products. While the consumer market struggles to keep up with operational challenges, fraudsters now have more opportunities to defraud and deceive consumers and organizations for personal gains. 

Impacted Sectors and Outcomes 

Organizations and consumers alike must both be on guard to not fall prey to fraud and other crimes that could arise as a consequence of the pandemic. Some standard modes where risk management can be deployed to mitigate risks and avoid getting defrauded. Read below.  

  • Sales and Distribution: Schemes, unjustified price inflation due to stockpiling of essential goods, and the sale of expired, damaged, or counterfeit goods owing to apparent shortages of essential commodities during the lockdown are being misused.  

  • Phony Online Websites and Social Media: Accounts on social media or attractive offers on fake websites entice consumers to make upfront payments for their desired products. Once the payment goes through, fraudsters don’t deliver the products.  

  • Commissions, Bribes, and Disagreement Of Interest: Situations?related to obtaining raw materials and services due to constraints on import and transport, give rise to illegal transactions such as commissions and bribes.  

  • Decreased Focus on Compliance: Disruptions in business operations and consumer markets have resulted in the organization’s reduced focus on compliance and risk management which has triggered infringement of laws and?regulations.  

  • Upsurge in Financial Disputes:?Increased cash flow challenges and other operational business disruptions have led to a rise in commercial and financial disputes between organizations and lessors, service providers, network partners and merchants. 

The Way Ahead To Handle Fraud Amidst COVID-19 Disruptions 

Growing cases of COVID-19 related frauds may impact the general governance, compliance, and transparency of businesses while distorting markets and unnerve investment communities. Therefore, organizations must consider both responsive and precautionary risk management measures as mentioned below to safeguard themselves from shortfalls and losses. Here are some of the ways:  

  • Origin Cause?Investigation? 

Implementing root cause analysis or origin investigation into any signs, criticisms, complaints, or suspicions concerning potential fraud and illegal behaviour must be prioritized by the risk management teams of the organization. A comprehensive analysis and investigation by the risk management team enable the business to promptly come up with corrective action plans and counteract any financial or goodwill loss. 

  • Pre-Emptive Reviews?of The Procedures  

To assist the organization in avoiding or mitigating fraud losses, a pre-emptive review of the business processes can also help with cost optimization. Such reviews help to improve the status of an organization as it is often noticed as a brand that proactively pursues fraud prevention. It shows that efforts have been made to detect and eliminate the ambiguities in the businesses processes and tools that have been employed. 

  • Analytical Risk Diagnosis of Adherence  

Every organization must perform an analytical risk diagnosis based on adherence as defined by the Anti-Bribery and Corruption?(ABC) framework. During the diagnostic review, the risk management team can identify any transactions (probable fraud transactions) that have been sustained by either the organization itself or through any related third parties. The diagnostic review also helps risk management teams to analyze whether the transactions or deals – be it an organizational or third party, has violated any ABC laws and regulations during the lockdown phase or not.  

  • Awareness Conferences or Webinars?For Employees  

To battle fraud, all employees of the organization must be made aware of fraud prevention and detection methods for cyberattacks, bribery and corruption. Awareness sessions help employees understand and realize the importance of compliance with ABC laws and regulations, which enables overall alertness of the organization’s workforce.  

  • Due Diligence?Of Latest Business Partners? 

If your organization has recently partnered or ventured with new businesses, thorough due diligence on their business standing would ensure that the target organization conducts business with partners that practice ethical and compliant regulations. Failing to do so can have an adverse impact on the organization concerning business continuity, legal and government reprimands, and result in reputational loss. 

The COVID-19 crisis poses significant disruptions, but it has also presented an opportunity to build a robust and resilient security architecture that can minimize the risk of fraud. Risk management services, authorities, consumers, and organizations need to implement appropriate precautionary controls to make effective decisions and adhere to the best compliance practices to stay ahead of this new disruption. 

How TRC helps with Risk Management? 

TRC Corporate Consulting enables and supports your business to turn dynamic challenges into growth prospects that allow sustainability and create long-term profits. Our risk management experts innovate the capabilities of traditional risk management techniques to deliver pragmatic solutions for your business. 

At TRC, our risk management strategy offers the following, but are not limited to: 

  1. Development of management plans for risks and opportunities 

  1. Measures to identify risks and lower chances of their occurrence 

  1. Usage of risk management data for administering and analyzing information 

  1. Creation of a register for expected risks and managing the risk management database 

  1. Formulation and presentation of risk management reports in review discussions 

  1. Evaluate results of the risk management program and record learned lessons  

Organizations partner with TRC to formulate and execute risk management procedures to achieve a competitive advantage, improved brand reputation and sustainable financial gains. If you have any queries related to our risk management services, contact us now! 

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