FRAUD RISK MANAGEMENT

FRAUD RISK MANAGEMENT

Fraud risk management is a clinical process that requires constant application and effective maintenance. An effective fraud risk management provides an organization with tools to manage risk in a manner consistent with regulatory requirements as well as the entity’s needs and expectations. In other to achieve this, management is advised to identify their scope and objectives and set targets for improvement together with steps to achieving them. Ekeigwe (2010).

Ekeigwe (2010) also states that management is expected to develop a broad ranging program that encompasses control, deploys a strategy and process for implementing the new controls, and assesses the existing controls in connection to legal and regulatory frameworks, so as to prevent, detect and response to incidents of fraud or misconduct.

PRINICIPLES OF FRAUD RISK MANAGEMENT

The principles based approach effective for establishing an environment with fraud risk management was outlines by Ekeigwe (2010) to include:

1. Fraud risk management which should be in place, including a written policy to convey the expectation of the board of directors and senior management regarding managing fraud risk.
2. Fraud risk exposure that should be assessed periodically by the organization to identify specific potential schemes and events that the organization needs to mitigate.
3. Prevention techniques to avoid potential key fraud risk events should be established, where feasible, to mitigate possible impacts on the organization.
4. Detection techniques should be established to uncover fraud events when preventive measures fail or unmitigated risks are realized.
5. A reporting process should be in place to solicit inputs on potentials fraud and a coordinated approach to investigation. Then correction action should be used to help ensure that potential fraud is addressed appropriately and timely.