Enterprise Fraud Risk Management: Key Insights & Best Practices

For many enterprises worldwide, especially those with a strong digital presence, fraud threads have become an unavoidable part of doing business. Without the appropriate safeguards, any company—no matter the size, location, or industry—can easily fall victim to fraud.

Even worse, fraud tactics now readily adapt to advances in technology, with fraudsters using more sophisticated tools like artificial intelligence and deep learning. This escalates the risks businesses face.

Despite the growing concerns surrounding fraud, 42 percent of affected companies fail to manage enterprise fraud risks—either lacking a reliable anti-fraud system or failing to conduct any form of risk assessment.

Companies that don’t invest in the latest technologies face a greater risk of having their weaknesses exploited. There is now a need to modernize internal processes and integrate up-to-date enterprise fraud risk management into their internal systems to protect their assets, reputation, and stakeholders from the detriments of fraud.

Monitoring Enterprise Fraud Risks: Common Business Fraud Types in Recent Years

Fraud is a persistent challenge for businesses, large and small. In fact, companies lose about 5% of their annual revenues—or approximately $5 trillion per year—to fraud alone.

Beyond the financial losses, the reputational damage can be even more severe. A publicized fraud incident can prompt customers and investors to lose trust in a company.

Avoid damaging your revenue stream and reputation by gaining a better grasp of the common and emerging types of corporate fraud to watch for.

Procurement Fraud

PwC describes this type of fraud as the third most disruptive economic crime faced by companies worldwide, following cybercrime and corruption. In a 2024 survey by the brand, 55% of companies across global regions specified procurement fraud as a concern in their respective countries.

Procurement fraud can occur at any point in the procurement process. A common scenario is when a vendor rigs the contract bidding to favor a supplier who has promised them a kickback. In these cases, suppliers often provide subpar materials or performance at inflated prices to benefit both themselves and the vendor.

In 2015, several contractors and Chicago Public Schools officials were discovered to have worked together to inflate the costs of a construction project. They reportedly submitted invoices with bloated rates and billed for work that was never finished, with total damage estimated to be around $20 million. The involved individuals were later indicted and convicted.

Asset Misappropriation

This type of fraud occurs when employees or management steal or misuse company assets. This can be done through falsified purchase orders, inflated costs, or even unwarranted use of company property. Misappropriated assets account for nearly 89% of all fraud cases, with average losses at $120,000 per incident.

A now-defunct energy company named Enron Corporation serves as a cautionary tale on asset misappropriation. In one of the largest accounting frauds in history, Enron employees reportedly engaged in fraudulent activities like hiding debt, inflating profits, and funneling company funds away from Enron. This led the company to file for bankruptcy in 2001.

Cyber Fraud

With this past decade’s strong push for digitizing internal processes and operations, companies have also witnessed a dramatic increase in cybercrime. The latest reports even project cybercrime to cost businesses over $10 trillion globally in 2025.

Cyber fraud is typically linked to other crimes like identity theft, which takes place when someone unlawfully obtains another person’s personal information for financial gain. This becomes a fraud case when the person impersonates the victim to conduct unauthorized transactions or access financial resources.

In 2017, the consumer credit reporting agency Equifax experienced a data breach that exposed the personal information of approximately 147 million individuals. Stolen data included Social Security numbers, birth dates, home addresses, and driver’s license numbers, raising concerns about identity theft. The company was subjected to substantial legal and financial penalties, as well as loss of public support.

Payment Fraud

Unsanctioned transactions and hacking into payment systems pose serious financial threats to businesses.

Such is the case of Zelle, a popular digital payment platform, which was involved in multiple reports of payment fraud in 2021. Criminals used different schemes, such as phishing and social engineering, to exploit Zelle’s instant transfer feature and trick users into authorizing transactions. This surge of scams resulted in a total of $440 million in stolen money.

3 Best Practices for Effective Enterprise Fraud Prevention

Preventive measures are the most reliable approach to effectively managing fraud risks. In particular, you can adopt organization-wide enterprise fraud management solutions. This is a form of online security geared towards detecting, investigating, and hindering fraudulent activities within a company.

Unlike other approaches that focus on a specific fraud type or an individual business unit, these solutions tackle issues more holistically. They consider any business fraud type that can occur in different areas of business—not only in finance, procurement, or information technology—to create a more comprehensive defense against fraud.

To supplement your fraud management solutions, consider implementing the following practices to further protect your business:

1. Create a Strategy for Enterprise Fraud Risk Management

A successful enterprise fraud protection strategy begins with a solid foundation. Establish a governance structure that designates a dedicated team responsible for overseeing fraud risk management for your enterprise, including the development and execution of relevant policies and regulations. Senior management should also support this team and help instill vigilance among the rest of the company.

Leveraging the latest technology should also be a part of your internal strategy. Instead of analyzing large amounts of data manually, implement fraud detection systems that use machine learning and AI to quickly perform these tasks and detect fraud patterns.

2. Conduct Thorough Fraud Risk Assessments

Risk assessments are crucial for identifying vulnerabilities within an organization. They should examine operations, internal processes, and systems to pinpoint areas that may be prone to fraud.

You can use the “fraud triangle” concept to evaluate the level of risk you have at your company. This covers the following:

• Motivation: Are there financial pressures (ex: employees needing to meet monetary targets or make up for poor past performance) or incentives (ex: executive compensation terms) that may urge an employee to commit fraud?
• Opportunity: Are there windows of opportunity (ex: auditing procedures, regulatory oversight, economic conditions) that an employee can potentially exploit to commit fraud?
• Rationalization: Does any employee have the ability to justify fraud?

3. Develop Prompt Response Protocols

While preventive measures are key, it’s important to plan your next steps when fraud does occur. Have protocols in place to allow your team to act quickly. Prioritize blocking fraudulent transactions and suspending compromised accounts to minimize potential losses and deter future fraud.

After a fraud incident, you should also make sure to conduct thorough investigations to immediately pinpoint its root cause. This will provide you with insights to help improve your fraud prevention strategies and enhance detection systems in the long run.

Secure Your Business from Fraud Threats

Fraud is a threat that companies cannot afford to overlook. As schemes get more complex by the day, businesses must be able to address the growing need for a robust enterprise fraud risk management system.

Fraud.net offers a suite of fraud detection and prevention tools powered by advanced AI and machine learning to address modern threats in real-time. Strengthen your defenses by partnering with the leading innovative security solutions against financial fraud. Book a meeting with our team today to learn more.