Question

Fraud perpetrated by an outside source is more common than the mainstream news reports because companies do not report and prosecute. Why do you suppose a company would choose to sweep it under the rug?

Answer 1

Answer. The companies might not report the frauds and sweep it under the rug because of the following:

Fear No. 1: Cost. Like health or car insurance, fraud prevention software is a cost for which you don't always recognize an immediate return. Management wants money brought back to the bottom line, and it's easy to assign a dollar figure to payment errors using platforms like duplicate invoice analysis. But when it comes to identifying and preventing risk and potential fraud, returns can be harder to quantify.

Fear No. 2: Technology. Companies are concerned that implementing new software technology might increase their exposure to fraud via data breaches. They're also concerned that technology will replace internal auditors. While data encryption and similar tools can combat the risk of data breaches, addressing personnel concerns are trickier.

Computers alone don't "discover" fraud; they simply detect red flags that can point you in the right direction. The red flag could be a simple data-entry error or an anomaly within the data. Technology helps identify red flags, but human input and investigation is required to determine if fraud is indeed occurring. From there, companies must ask questions.

Fear No. 3: Loss of reputation. Companies might fear their reputations will take a hit if they uncover ongoing fraud schemes. Social media has evolved to become an incredibly popular form of information sharing, so all it takes is the hint of a rumor and the damage is done. Employees might post information — or alleged information — that makes it appear as though a company is attempting to hide something. For that reason, it's to a company's advantage to be open with their employees in their effort to fight fraud. Employees are less likely to whistleblow in public when there are safe, internal options for them to report discrepancies to management. For example, use proactive social risk-management strategies, such as toll-free hotlines, to help employees feel comfortable reporting potential or suspected frauds without the fear of retaliation.