ICFE Group of CompaniesInternational Cybercrime & Forensics ExaminersSINGAPORE | MALAYSIA | HONG KONG

ICFE FRAUD RISK MANAGEMENT PROGRAMMEA comprehensive strategy in building defence against corporate fraud and misconduct

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Integrity • Accuracy • ObjectivityWebsite: www.icfe-cg.comEmail: enquiry@icfe-cg.com

ICFE Group of CompaniesFollow us:ICFE Consultancy Group Pte Ltd • Co. Reg: 200820310Z • Tel: +65 3152 0323 • Fax: +65 6323 1839 ICFE Malaysia Sdn Bhd • Co. Reg: 871789-X • Tel: +603 2282 5406 • Fax: +603 2282 5407

INTRODUCTIONRecent succession of corporate scandals and misconducts had wreaked havocs within the corporate communities and also brought a bad name to internal controls system and its fellow sentinels. These strings of events had brought home a strong message to the regulators and senior executives and that is we need to develop a stronger and more robust strategy against potential fraudsters and their schemes. This strategy has to achieve three objectives – Prevention, Detection and Counteractive Response: -

Prevention – Mitigating the potential risk for corporate fraud and misconduct from occurring

Detection – Ability to uncover potential fraudsters and/or its schemes when they occur

Counteractive Response – Applying accurate & effective remedial strategies to reduce real & potential damages caused by fraudsters and its schemes

The challenge is for companies to formulate and develop a well-balanced strategy that incorporates elements that will achieve the three goals of managing fraud risk.

WHY FRAUD OCCURS?We believed that the key to effectively managing fraud risk is to understand why fraud occurs.

The fraud triangle is originated from the hypothesis by famous criminologist, Donald Cressey. According to him, three factors have to exist for someone to commit fraud. These factors are as follows:

• Perceived unresolvable pressure • Perceived opportunities for resolution• Rationalisation

Perceived Unresolvable Pressure

This portion depicts what motivates a person to commit fraud. He or she is bearing the pressure of perceived problems that cannot be resolved through legitimate means. Thus, he or she will begin to consider taking the risk of breaking the law (e.g. misappropriating company’s assets, taking bribes, etc).

Perceived Opportunities for Resolution

This portion depicts the possible areas that a person perceived he or she could abuse with his or her position in secrecy and not likely to be caught. The person also has to perceive that by doing this his or her problem could be resolved. Most fraud are committed by senior executives and they continue to maintain their status as long as they are not caught.

Rationalisation

Most fraudsters do not see themselves as criminal rather they perceived themselves as someone being caught in a bad situation. Thus, fraudsters will normally rationalise the crime he or she is committing as acceptable and justifiable.

By understanding these elements that contributes to the occurrence of fraud, we can measure them against each organisation and formulate an effective fraud risk management programme.

FRAUD TRIANGLE

PR

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SU

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UN

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RATIONALISATION

The Fraud Triangle:

ARE WE DOING IT RIGHT?

Many businesses chose to take the notion of “we will tackle the problem when it happens”. Unfortunately, we can’t adopt that thinking when we are dealing with fraud or misconduct. It will be too late and extremely costly to the businesses by the time they are aware of the incidents. This often left them clueless of how they should response to such incidents.

Businesses could consider these questions to have a feel if they are doing adequately or correctly in responding to fraud risk and misconduct:

Do you have relevant & adequate system to manage and identify fraudulent activities?

Are you aware of the types of fraud that your company, business units or functions are vulnerable to?

Are you familiar with the common fraud within your industry?

Are your company’s internal controls strong enough to reduce the prominent fraud risks?

Did you test the effectiveness of your company’s anti-fraud and internal control system?

Is there a fraud management protocol to follow when fraud is detected?

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© 2014, ICFE Group of Companies ICFE Consultancy Group Pte Ltd • Co. Reg: 200820310Z • Tel: +65 3152 0323 • Fax: +65 6323 1839 ICFE Malaysia Sdn Bhd • Co. Reg: 871789-X • Tel: +603 2282 5406 • Fax: +603 2282 5407

FRAUD RISK ASSESSMENT (FRA)

We assess the fraud risk of each business on the basis of the typologies of fraudulent schemes & misconduct which it is exposed to and intended to mitigate. Simultaneously, we also determine whether the existing control structure is effective and adequate.

An example of FRA process can be seen below:

DESIGN

We design and develop customised controls to mitigate risks identified and at the same time balancing business needs, regulatory requirements and relevant international best practices.

IMPLEMENTATION

Formulating effective process to implement new controls and assigning relevant authority, responsibilities and resources to selected individual tasked to manage these controls. ICFE is also able to assist businesses in selecting and coaching suitable individuals for this important role.

Simultaneously, business wide training and awareness talk will also be made available so that all levels of needs are met.

ICFE’s in-house communication team will assist businesses to design necessary peripherals and manage publicity campaigns to promote the new framework and/or controls to all stakeholders.

EVALUATIONAll new framework and controls will be subjected to post-implementation evaluation by ICFE anti-fraud specialist. Both processes and related personnel will be evaluated through covert penetration, targeted surveys and self-assessment.

COMPLEMENTARY SUPPORT SERVICES

ICFE also provides the following professional services to complement our FRM programme:Fraud Examination ServicesProfessional Fraud InterviewingStand-alone Whistle Blowing Service

ABOUT ICFEThe ICFE Group of Companies is a think-tank group of firms dedicated to Fraud Risk Management, Investigation and Prevention. Headquartered in Singapore with regional offices in Malaysia and Hong Kong, ICFE Group of Companies was formed with the intention of combating fraudulent activity and maintaining good corporate governance, and consequently providing professional training and value-adding consultancy services at affordable rates. Our consultants are practicing Certified Fraud Examiners (CFE).

ICFE aims to share its expertise with working professionals or organisations who wish to stay abreast of the latest developments in corporate skills and anti-fraud measures. We do this by organising various public training programmes, seminars, and customised in-house training programmes which are tailored to suit companies in their respective industries.

At ICFE, we focus on five areas of professional development:1. Fraud Prevention2. Anti-Money Laundering3. Corporate Governance & Business Ethics4. Digital Forensics5. Corporate Skills & Leadership Development

Every member of ICFE is dedicated to bringing about a wholesome experience to all clients via Inspirational training, Innovative consultative work and programmes that build Intelligent minds.

Ascertain the business areas, functions or processes to assess.

Document & register identified fraud risks / misconduct.

Assign risk based on likelihood of occurrence and gravity of impact.

Mediate risk with new or enhancing control measures.

3WHY ICFE CONSULTANCY GROUP?ICFE recognised that it is a mammoth task to balance business needs and managing fraud risk thus we partner our clients by putting together a team of anti-fraud specialists to develop a customised Fraud Risk Management (FRM) Programme for them that consist a full suite of initiatives that aimed to prevent, detect and counteract fraud and misconduct.

We believed that an effective and comprehensive FRM Programme should be a continuous process that achieved the three objectives of Prevention, Detection and Counteraction Response and at the same time is aligned with regulatory requirements, business needs and industry expectation.

An overview of our FRM Programme phases:

Complementary

© 2014, ICFE Group of Companies ICFE Consultancy Group Pte Ltd • Co. Reg: 200820310Z • Tel: +65 3152 0323 • Fax: +65 6323 1839 ICFE Malaysia Sdn Bhd • Co. Reg: 871789-X • Tel: +603 2282 5406 • Fax: +603 2282 5407

FIND OUT MORE

For more information, please contact:

ICFE Group of CompaniesInternational Cybercrime & Forensics ExaminersSINGAPORE | MALAYSIA | HONG KONG

Integrity • Accuracy • ObjectivityWebsite: www.icfe-cg.comEmail: enquiry@icfe-cg.com

ICFE Group of CompaniesFollow us:

Stanley Chia Group Managing Director & Chief Fraud ExaminerEmail: stanley@icfe-cg.comPhone: +65 3152 0323

Elsie LekGroup Sales ManagerGroup Business DivisionEmail: elsie@icfe-cg.comPhone: +65 8399 5074

Nonya Lailabok Assistant Group Sales ManagerGroup Business DivisionEmail: nonya.lailabok@icfe-cg.comPhone: +603 2282 4691

CFE, CAMS, CFCI, CACM, CMCP, ICPS

ICFE Consultancy Group Pte Ltd • Co. Reg: 200820310Z • Tel: +65 3152 0323 • Fax: +65 6323 1839 ICFE Malaysia Sdn Bhd • Co. Reg: 871789-X • Tel: +603 2282 5406 • Fax: +603 2282 5407