According to economists, manufacturing businesses are ranked fourth in the number of reported fraud cases and second in total money lost out of all industries. The most common types of fraud are related to corruption, fraudulent payoffs, and doctored financial records.
Battling fraud is complicated by the fact that fraud in manufacturing usually continues for two years before it is detected. Occupational fraud is more likely to be detected by accident than by internal or external audit and controls.
The most common reason that companies are vulnerable to fraud is a lack of sufficient controls and analysis to detect suspicious behavior. The most sensitive areas are accounting, financial operations, materials, and supply chain.
These are several methods that businesses can use to develop a strong policy on preventing fraud, such as:
- Conducting a fraud risk assessment for various activities.
- Understanding that humans make mistakes and utilizing technology to distinguish between accidental and willful negligence.
- Pairing manual and automated solutions according to industry best practices to ensure data is properly reviewed.
- Preparedness is key to ensure that CRMs, ERPs, and SAPs are protected. Over time, as technology became increasingly sophisticated, the complexity of possible threats exceeded the capabilities of protective measures. Security must evolve and adapt to meet new challenges.
By conducting a detailed review of configurable controls, companies can strengthen the set of checks and barriers that protect against fraud.
Cases related to warranties
One area of focus for security should be identifying suspicious patterns of warranty claims. This type of fraud involves stealing genuine parts by making false warranty claims.
Evinent Analytics tools can detect this type of fraud by analyzing warranty claims data and highlighting suspicious records. By highlighting and closing associated vulnerabilities, significant amounts of loss can be prevented in the future.
Inventorying is a routine activity where fraud can frequently occur if adequate measures are not taken. The offender may try to hide theft of materials by manipulating digital data to conceal inaccurate inventory.
Conducting periodic in-person inventory of physical goods and using inventory recordkeeping procedures backed by technologies like barcode scanning can help prevent and detect fraud.
Fraud prevention programs can be successful if employees feel that attempted fraudulence will be detected. The exact methodologies will differ based on your company's specific needs and access to manual or automated means of assessing workplace operations.