Attached you will find two photos of myself at Mt. Vesuvius in Italy. The first photo illustrates a selfie taken after climbing to the summit of this magnificent volcano. Below me you will see a small forest fire starting to emit smoke. The second photo is later in the evening that same day and is a view of the volcano from hundreds of kilometers away, looking at the summit I climbed earlier in the day. This photo clearly shows how that smaller fire grew to an immense blaze. Where am I going with this? This time lapse is extremely indicative of fraud occurrences if gone untreated; they start small, correctable, manageable and treatable, and if un-manipulated, will grow into a huge problem!
Fighting fraud does not have to be difficult; too many times I see carriers trying to force extremely advanced programs without forethought and strategy. It is so important so start small, with the basics and then work up a strategy that is customized to their specific challenges and issues. In my book and in many articles I have written, I propose Opportunity Theory, wherein fraudsters look for weak links and vulnerabilities and once these are revealed they take advantage of this opportunity. This should be the primary focus of carriers when they develop their counter fraud programs, look to focus on the vulnerable areas and put out these fires early!
Studies that I have read claim that almost 25% of carriers have never performed a vulnerability analysis, furthermore, the remaining 75% that have participated in this approach performed it inaccurately and ineffectively. It is recommended that the following multistep process be followed in order to assist with this endeavor: 1. Identify risks/vulnerabilities. 2. Develop workable red flags. 3. Integrate controls. 4. Monitor. 5. Measure. 6. Modify and reassess.
In order for a company to develop strong counter fraud approaches, a formal vulnerability assessment must be performed. It is crucial for fraud fighters to have a keen understanding of the specific areas of vulnerability in order to make proper decisions on policies and procedures. This is one of the most significant areas of opportunity I have seen in the area of counter fraud; the general need for re-focusing current fraud programs and procedures. In the majority of companies that I have had the opportunity to work with over the past two decades, I would estimate that over 75% have counter fraud policies that are based on weak or moderately weak information. As this weak foundation is the basis for their preventative fraud efforts, there is no doubt that many of these companies see very dismal fraud results from their efforts. It cannot be emphasized enough how companies need to find those small fires first, before they become unmanageable. Find those smaller vulnerabilities, reduce opportunity, and put out the fire!
Good luck and stay safe! And remember to send me your selfies putting out your fires! -Dr. Fraud