Defending Your Business in Extraordinary Times

"Difficulties mastered are opportunities won" -Winston Churchill


Unprecedented changes have occurred in how business processes are carried out. Staff have been redeployed to work remotely, staffing levels severely reduced, cash flow has been interrupted. New methods and shortcuts are being taken to process sales or handle payments. Online banking, e-transfers, new data sharing methods have quickly been expanded and IT resources are being deployed in ways we never thought much about before and stretched.

In short, how we did business last month is very different to how we are doing business this week and next.

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  • Hastily-made changes can seriously degrade a company’s internal controls; compromising fraud detection as well as error and abuse prevention.

  • One of the best business controls is preventing one person from initiating, approving, and recording a transaction without oversight from another person.

  • Don’t let these extraordinary times impact your vigilance. But recognize there will be increased personal pressures and opportunities to commit fraud due to the changes in internal controls.

MNP is here to help you navigate these uncertain times. Contact Derek Malcolm or Lisa Majeau Gordon for more informaiton.

Such vast and hasty changes can seriously degrade a company’s internal controls. Controls that prevent errors, fraud, and abuse may become compromised as the processes and people change quickly.

It may take some time to redesign business safety nets to fit the new conditions, but there are a number of practical steps that can be taken to prevent fraud now.

Take a breath. Before concluding or authorizing transactions or making payments, take a moment to check the details, confirm with the party(ies) involved and, if in doubt, wait for further clarification.

Segregate. Remember that one of the best business controls is preventing one person from initiating, approving and recording a transaction without oversight from another. Check to make sure that key areas of your business still have effective segregation of responsibilities. At a base level, segregating conducting transactions from accounting for them is a good start.

Do not sign blank cheques, share passwords or allow wider team access to electronic banking. Electronic banking should be limited to very few people, and monitored by the owner or executive daily.

Make certain your networks has sufficient security in place to ward off internal misuse or external attacks.

Review payroll carefully. Look for inflated wages or hours, previously laid-off workers, duplicate payroll accounts for a single employee, duplicate direct deposit bank accounts and unusual payments such as backpay, vacation or advances. Monitor overtime claims and expense reports for validity.

A regular financial reporting package should be prepared and provided to the executive / board for review, weekly. This package should be designed in a top-down, risk-based manner to give decision makers what they really need to know, including budget-to-actual comparatives in all major revenue and expense categories.

Limit or remove access to corporate credit or purchasing cards. Review statements carefully; the person incurring the expenses should not be the same person to review them for operational benefit and or code them for accounting purposes.

Reconcile your bank statements weekly and investigate any discrepancies.

Examine all invoices received under contractual terms and reconcile them to the terms and conditions of the contract to identify any potential overcharges or unauthorized fees.

Inventory all non-cash assets, such as equipment, vehicles, technology, and office assets and track their locations periodically.

Protect patents, unique technologies, customer lists, and other entrepreneurial matters that are of significant value to your business.

Continue to monitor key business processes such as depositing money, making payments, inventory movement and accounting adjustments.

Pay attention to your employees. Look for signs of stress or unusual behaviours. Good people are capable of unethical actions when they feel pushed to the edge. Financial pressures, isolation pressures and uncertainty can motivate employees to seek an opportunity for financial gain at your expense.

Keep a positive attitude with employees, customers and business partners.

Maintain active communication with your teams, but refrain from disclosing sensitive or confidential information to everyone. Managing communications will be key to weathering the storm.

Don’t let these extraordinary times impact your vigilance. But recognize there will be increased personal pressures and opportunities to commit fraud due to the changes in internal controls and new ways for otherwise good people to rationalize bad acts.

Pressures, opportunity, rationalization: when these three exist together, fraud may not be far away.

For more information on protecting your organization from internal fraud, contact Lisa Majeau Gordon, National Leader, Forensics and Litigation Support, at 780.453.5375 or lisa.majeaugordon@mnp.ca