Data Analytics is Key to Effective Fraud Prevention|
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At a glance:
- The main takeaway: Data analytics is the frontier for effective internal anti-fraud controls, but many companies are slow to adopt the more modern approach despite proven results.
- What’s at stake: Developing an anti-fraud strategy that fails to include data analytics could leave businesses exposed to unnecessary risk and losses.
- Next steps: Businesses should consider evaluating whether their anti-fraud controls measure up to the modern-day risks and consider the potential benefits of a new data analytics-based approach.
Ready to take your company’s fraud prevention strategy to the next level? Contact Aprio’s Risk Analytics & Forensic Technology Services team to get started with an enterprise risk assessment and red flag analysis.
The full story:
Did you know that organizations lose approximately 5% of annual revenue to fraud? That’s the latest estimate by Certified Fraud Examiners (CFEs), as published in the Association of Certified Fraud Examiners (ACFE) 2020 Report to the Nations.
Implementing effective internal controls improves return on investment (ROI) by detecting and preventing fraud before it occurs– these types of measures are proven to lower fraud losses and facilitate faster detection. Although the use of anti-fraud controls is generally on the rise, insufficient internal controls are still contributing to nearly a third of the fraud cases included in the ACFE study. In other words, businesses could have potentially saved millions of dollars by introducing strong, anti-fraud internal control measures as simple as a new hotline or training policy, for example.
Does your company’s anti-fraud policy measure up?
Even if your company has implemented some anti-fraud controls, it’s important to continually assess whether you are taking the appropriate steps to ensure those controls remain effective and innovative. As fraudsters become more sophisticated, anti-fraud tactics must advance as well. With that in mind, it’s important to evaluate the potential power of data analytics in detecting and preventing fraud.
Companies are increasingly relying on digital tools to do business and, in turn, creating new vulnerabilities and risks for fraud – this trend was further exacerbated by the recent increase in remote workforces. However, it’s possible to harness that same digital power to improve fraud prevention. Data analytics is the next frontier in fraud-fighting as it harnesses the power of business data to passively and preemptively identify potential fraud indicators. Once you identify the necessary data parameters and establish a defined strategy, you can unlock deeper insights into your business’s fraud risks (not to mention other key performance indicators).
Despite the potential potency of data analytics as a fraud prevention tool, approximately 30% of internal auditors represented in the ACFE study reported that they do not use any data analysis technology to detect fraud. That’s a huge pool of missed opportunities, representing millions of potentially preventable losses.
Making data analytics work for you
Data analytics can be a powerful anti-fraud tool, but it’s not always an immediately intuitive solution; this often leads to slower and less effective adoption. The most important step to using data analysis as a fraud prevention solution relies on identifying and accessing useful data, which is challenging without the right approach.
As mentioned earlier, knowing the correct data parameters and having a defined strategy is important to unlocking the power of data analytics, yet those data parameters and sources aren’t always easy to identify. If your business doesn’t have a clear objective and strategy when building a data analysis anti-fraud control, then it may be helpful to call in reinforcements. Consider partnering with a team of advisors who can leverage their industry experience to equip your company with the most robust possible defense against fraud.
The bottom line
Aprio’s Risk Analytics & Forensic Technology (RAFT) combines the expertise of forensic accountants and data scientists to help businesses detect, prevent, and monitor fraud. We can perform an enterprise risk assessment and red flag analysis to help you understand your risks and develop a strategy to mitigate them. You may also be a good candidate for Aprio Risk Insights, a pre-built and managed data analytics solution for proactive risk mitigation and fraud.
If your company is ready to improve its anti-fraud measures and harness the power of data analytics to detect and prevent fraud, contact us today.