Fraud Risk Management: What It Is And How The Process Works

"In today’s digital age, fraud is more sophisticated and prevalent than ever before. According to data from the Federal Trade Commission, consumers lost over $5.8 billion to fraud in 2021."

As consumer technologies continue to advance, fraudsters have evolved to commit highly elevated and organized cybercrime. Companies need to prioritize detecting and preventing internal and external fraud attacks to keep their customer’s information safe and protect their businesses from financial losses.

Conducting a fraud risk assessment is the first step any company can take to proactively mitigate fraud, regardless of industry. In this article, we’ll cover the key elements of fraud risk assessments, including what they are, how they work, and why they are essential to any fraud protection strategy.

What Is a Fraud Risk Assessment & How Does It Work?

The goal of a fraud risk assessment is to identify a company’s exposure and vulnerabilities to fraudulent activity. The assessment is always customized to the organization’s industry, functional requirements, and risk tolerance. Leaders of each department should conduct their own risk assessments to determine the likelihood of fraud. Risk assessments should be updated regularly to reflect changes in fraud trends and the evolving business environment.

A fraud risk assessment should address five key areas of opportunity for fraud: