Theft and fraud control in clubs

Fraud sign on table.

Fraud is incredibly expensive. All kinds of businesses, irrespective of your size, run the risk of losing both revenue and reputation through fraud committed by customers and people associated with your business.

Fraud can be a high cost, and it can threaten the very survival of any business if not prevented. Your managers, business owners are unaware of the fraud risks inherent in your operations and fail to monitor these risks adequately. Lack of awareness often results in a significant amount of fraud going undetected and unreported.

How to minimize fraud incidents
Theft and fraud control should form an integral part of your club's risk management strategy.

  • Adopting a robust theft and fraud prevention policy;
  • Identifying risk areas within club operations;
  •  Implementing fraud prevention strategies to deter or minimize opportunities for theft and fraud.

Policies, procedures, and technology controls should be incorporated into all aspects of the club's governance, management, and operations and reviewed and regularly reported to ensure they are working effectively.

Common fraud issues
Because fraud is a hidden cost, it can be tough for business owners and managers to identify it and stop the losses occurring. Instances of fraud can happen in all areas of a club regardless of its size. Areas of fraud risk include:

  • Finance and administration - for example, diversion of payments, false invoicing, chargebacks, falsified accounting records;
  • Assets - for example, theft of cash (from points of sale or registers/safes), stock or equipment;
  • Corruption and misconduct - for example, kickbacks from suppliers in exchange for continued business, Fake or stolen ID cards.

What you need to know
The Association of Certified Fraud Examiners (ACFE) published the results of its most-recent global fraud survey in 2018.

  • Fraud is incredibly costly. According to this survey, the total cost of the fraud was over $7 billion. Twenty-two percent of the cases cost more than $1 million. Based on the respondents, it is estimated that a typical organization loses 5 percent of its annual revenue to fraud every year.
  • Small businesses are at higher risk. The study found that organizations with lesser than 100 employees suffered the most substantial median loss and had the highest percentages of cases in the study. However, for small businesses, 42 percent of the frauds in the survey were caused by a lack of internal controls.
  • Hotlines are becoming an expected control in most companies.
    In the study, CFEs reported that 63 percent of the organizations they worked with had a fraud reporting hotline in place. Fraud losses were 50 percent smaller at organizations with hotlines than at those without.
  • Physical documents are still critical components of fraud. Of the top 8 concealment methods used by fraudsters in the reported frauds, 55 percent created fraudulent physical documents.

The key to fighting frauds
It is essential to recognize that no theft or fraud is possible without opportunity. The key to good risk management control is to identify the opportunities for theft and fraud and create an environment that deters fraud. For example, doing a thorough check of Identity cards of customers entering your venue. Developing internal control through the adaption of technology will help you prevent and minimize damages. In the next blog, you will read detailed step-by-step adaption of best practices to minimize fraud.

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