India

Fraud Risk Management 

Fraud Risk Management

 

Going by the results of the KPMG in India Fraud Survey Report 2012, with close to 55 percent of the chief executives surveyed having indicated that their organizations have experienced fraud in the last two years – fraud is definitely a reality today. All organizations, irrespective of size and sector of operations, can face fraud risks. It is a major concern that can have a devastating impact on an organization’s bottom line, its reputation and even its continuity.


 

94 percent of our respondents also agreed that frauds have become more sophisticated over the last two years making it difficult to detect them. However, it is surprising to note that 71 percent of the respondents think of fraud as an inevitable cost of doing business. This is dangerous as it could lead to  organizations having a tolerant approach towards fraud and subsequently not investing enough in the appropriate fraud risk management controls and framework. It also translates into a culture of merely reacting to fraud and not proactively taking steps to mitigate it. Like other business risks, fraud risks too can be mitigated if appropriate fraud risk management strategies are implemented. 

 

 

Fraud risk management is a proactive approach towards fraud and aims at preventing and detecting fraud early on. We at KPMG in India, have methodologies which are sector and industry specific and can be customized to your needs. Owing to our immense experience in fraud prevention and detection we can help you help your organization tackle the risk of fraud. Our leading services in the area of proactive fraud prevention, detection and response are:

 

 

  • Fraud awareness workshops and trainings: These sessions can help make you conscious of potential fraud indicators; and can be designed depending on the audience function, level and management expectations. Tailored to your specific organization or company, participants learn to directly apply working concepts to their specific situation with concrete, take-away measures and tools to reduce fraud and promote an ethical environment. Training includes expert speakers, video presentations, group discussions and role-play exercises. We have conducted seminars/ workshops for the Association of Certified Fraud Examiners, India Chapter; the Institute of Internal Auditors, USA (Delhi Chapter), to name a few, as well as various chambers of commerce, regulators, enforcement agencies etc. 

 

  • Fraud Risk Assessment exercise: We assist management in developing fraud prevention strategies by identifying risks and weaknesses in their processes and evaluating potential gaps in their control framework. Through the use of our in-depth sector knowledge, customized data analytics reports can be generated, results of which are often surprising to the management.  Further, a dashboard of anti-fraud controls can be implemented, which can then be monitored via controls testing on an ongoing basis.

 

  • Forensic health check: A quick and easy review/ basic level diligence procedure for organizations which do not want a comprehensive Fraud Risk Assessment.  Sometimes a basic check helps understand the health of the organization and can provide insights into a more focused and targeted approach.

 

  • Organization perception survey: These surveys are a popular way to gauge your employees’ view on the current risk management programs and processes prevalent in your company. Such surveys can help the management become aware of their true strengths and weaknesses and help customize and improve their fraud risk management planning.

 

  • Ethics helpline/ hotline: Our ethics helpline service assists employees as well as third parties associated with an organization by providing them an independent conduit to report incidents of unethical practices. A whistleblower hotline / Ethics helpline has also emerged as the number one way to detect and report fraud in our India Fraud Survey 2012. It has been observed that such hotlines also become preventive tools over a period of time. For more details on this service, please click here.

 

  • KPMG’s Risk Assessment and Fraud Vulnerability Tool: A leading tool to help you evaluate your organization’s preparedness towards fraud within a matter of a few hours.  This diagnostic tool is quite popular and allows us to do a quick desktop-based fraud risk assessment of your organization.

 

  • Predictive data modeling: Through the use of various techniques (such as our fraud response modules and dashboards) and tools, we can help highlight red flags across various processes.  This would thus help in developing an early warning system that can predict and potentially help prevent fraud. 

 

  •  Anti counterfeiting risk assessments: We can assist organizations in developing and implementing an effective anti-counterfeit framework. (For more details, refer to our FRM brochure)

 

  • Competition risk management: Helps enable clients to understand key compliance aspects and checks for potential violations of the Competition Act 2002 (notified in 2009).

Our quality approach lies in constant innovation and out of the box thinking.

We conducted an in-depth fraud risk assessment exercise for a company in the consumer market sector, to help identify gaps in their procurement process. Please review the case study for more information

 

Case Study

Our client is a well known Indian company in the consumer market sector in the health and wellness space. The company had grown manifold in the recent years and had aggressively acquired entities overseas and expanded operations globally. Because of its exponential growth, the client wanted us to review their procurement process, one of the key functions for the organization, across locations for two of their flagship brands.

 

We performed walkthroughs, site visits and undertook customized data analytics on ERP (Enterprise Resource Planning) data as well as data residing in specialized tools and applications. We also gathered intelligence from the industry. We created an inventory of fraud risks and tested existing controls for design and operating effectiveness. We then recommended new controls that could be implemented to mitigate the risks which were not covered. The issues uncovered included the following:

  • Procurement at rates which were not optimum
  • Double payments made to certain vendors
  • Lack of segregation of duties in the procurement function
  • Vulnerabilities in the vendor management process
  • Cases of employees unearthed, who were also vendors to the organization
  • Farmer suppliers not promised market rates resulting in procurement through intermediaries, increasing the rates as well as complexity in the procurement process
  • Inadequate quality control procedures.

 

Post our assessment, the client was able to take steps towards addressing all the issues stated above. We then designed a control framework for them which was both easy to implement and cost effective. We also conducted workshops with the operations team, to help them understand and agree on the required controls framework.

 

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