When considering the board's role in risk oversight, the focus is often on external business and financial risks to the enterprise. However, this article from The Conference Board argues that a board must take responsibility for implementing and overseeing an internal fraud risk management program that is effective at detecting and deterring fraud by officers and employees.
According to a study cited in this article, organizations lose an estimated 5% of annual revenue to fraud, most of which is due to fraud by executives and management. Organizations that implemented common antifraud controls, however, such as reporting hotlines, employee support programs and surprise audits, were able to reduce the amount of losses attributable to fraud by more than 50%. This article describes the essential elements of an effective fraud risk management program and the boards role in implementing and overseeing that program.
The Role of the Board in Fraud Risk Management, by Andi McNeal, appears in the October 2011 edition of Directors Notes, published by The Conference Board. The Conference Board is a global, independent business membership and research association working in the public interest to provide the world's leading organizations with the practical knowledge they need to improve their performance and better serve society. Additional information from The Conference Board is available on its website at www.conference-board.org.