Forward looking to prevent fraud

I have recently come across a couple of organizations where it has been felt that a fraud may have taken place. The management is not sure and is trying to take stock of current positions in these matters.

There are a couple of points of action – one is to actually investigate and find out if there has been misappropriation and then to take the necessary steps to tackle this. The next step is more forward looking – to tighten current processes and put in place controls and systems to prevent or reduce the chances of such problems in the future.

In fact in one company, the management has got proactive and is taking an inventory of all the business activities to understand where misappropriations could happen and what systems need to be put in place for the future.

Do take time out to check if you have got checks and balances in place in your business. Of course, there is no need for paranoia; but, as many of us like to say – "Trust but Verify". Often, fraud and misappropriation starts when there is some slack in the system. In my next post, I will touch on a few basic precautions that could minimize leakages. As a start up or growth company, you may have little time or energy to deal with such issues. However it is important to spend some time and to think about this from a risk management and risk mitigation perspective. Prevention is any day better than the cure.


  1. Gopal Rao says:

    It’s good to see you bring out this very important, but oft-neglected aspect by entrepreneurs.

    The importance of systems and processes in an organization, start-up or otherwise needs all the emphasis. Most entrepreneurs either are paranoid or reckless. The paranoid may stunt the growth (in the worst case not even getting started); and the reckless may land up in trouble chasing growth at all costs. Many times the common refrain would be: ‘we are small, why do we need elaborate processes? we have things under control’. It is only a matter of time before problems start showing up with such an approach.

    Systems and Processes are key elements to ‘scaling’ and ‘sustained success’ as against being a ‘flash in the pan’ or a ‘me too’ or a ‘failed enterprise’.

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