Introduction from an RBC Branch Manager.
Several Vancouver branches of RBC Royal Bank have decided to provide seminars for small business clients to learn about some key business topics. The plug: this session made every penny paid to RBC this year through Yupana worth it.
Internal controls and risk management are not easy to implement for many organizations and quite often this is because they aren’t well-understood. For that matter, even those terms don’t mean anything to most people at a glance.
So what are they? Internal controls are actually a form of risk management. Risk management is the system that you use to ensure you don’t lose out on money, property, time, efficiency or whatever else you deem to be essential to your operation.
The problem with risk management is that you have to plan for a “what-if” scenario and many people are predisposed to thinking about the “what I’m doing now” scenario. It’s incredibly proactive. What the people at RBC elected to do was make these “what-if” scenarios very real for all of us in attendance.
Presenters
There were presentations from a pair of professionals that get involved after fraud occurs.
- Marshal Wong, CA - Forensic Accountant from KPMG
- Sgt. Tony Farahbakhchian - RCMP Pacific Region Counterfeit Coordinator, Commercial Crime Section
Sgt. Tony Farahbakhchian from the RCMP describes the finer points of bills and how one can quickly identify a genuine bill.
After working through the discovery and subsequent follow-up from fraud on a client site in 2010, I’m all too familiar with the time and expense of the fallout. Yupana has made fraud prevention for clients a core focus in consulting.
Why Should You Care?
Many business owners have trouble putting themselves in the position of someone who could be defrauded. If you haven’t experienced it, it’s hard to picture. In addition, it’s very humbling because it requires admitting you aren’t invincible. So why is it important to care about?
- Incidents of fraud are on the rise as card skimming and forms of theft through electronic means are increasing in number.
- Privately held companies are typically the hardest hit.
- Many incidents of fraud are caused by employees that harbour a high level of trust or certain customers or vendors.
What Can You Do?
Dealing with fraud happens in 3 distinct steps:
- Prevention
- Detection
- Response
For too many small businesses, it is sometimes only the third step that receives attention and, by then, it’s too late. Sgt. Farahbakhchian explained to everyone that fraud is something you can manage, but you can’t stop it all. All you can do is prevent what you can, be sure to detect it and respond appropriately.
The easiest way to prevent internal fraud is to know your employees – pay attention when that $50,000/year staff member picks up a brand new BMW. Also build a good rapport with employees and get to know their financial situations – tough times can lead to certain liberties. File expenses on time and require descriptions on all receipts.
Also, make sure that incompatible duties are done by different people in your company. The person doing your bank reconciliations shouldn’t be signing cheques. Speaking of cheques, keep track of them. Don’t sign blank ones to be used at a later date.
There is a danger that this advice is a call to action to not trust employees and nothing could be further from the truth. If you can build standard processes and checks into your employee relationships, it makes it easier to focus on building trust.
The internal controls most appropriate for you are specific to your own organization, but you definitely should not go without. Lawyers and investigators such as Michael Wong do not come cheap, but visiting the risks inside your business before something happens is. Thanks to RBC for hosting the event – looking forward to more.
