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Corporations big and small have to deal with the specter of fraud and embezzlement risk, so corporate fraud prevention has been the answer. The challenge is that, by and large, corporate fraud prevention fails to address the cause of the symptoms and so the losses continue to mount up. Jobs, reputations, stock prices, capital and opportunities are all negatively impacted. The business fraud prevention industry focuses on software solutions that seek to prevent invoice phishing scams and other Business Email Compromise attacks (“BEC attacks“) from reaching your inbox. The criminals know this and now have sophisticated schemes already in play that render this software approach relatively incomplete, and therefore; potentially useless. Addressing the symptom of the disease, rather than eliminating the disease itself, usually isn’t the answer.
The Problem is in How We Manage Default Risk
Fraud and embezzlement loss risk are part of the larger mosaic of risks that are all part of default risk prevention. The main tools used by corporations and businesses to address default risk exposure relate to mitigation. Mitigation is what you do after the fire has already burned down your house, and that is cold comfort at best. Default risk management requires a proactive approach that encompasses managing market risk, fraud risk, financial reporting transparency risk, business execution risk, vendor risk, liquidity risk, collateral risk, third-party claims risk and employee management risk – just to name a few. Any one of these risks can take down a corporation and that’s why proactive risk elimination is the only solution.