What Steps Make Up the Fraud Risk Assessment Process?

A fraud risk assessment should take into consideration the particular operations and industry of a
business. Management and the managers in charge of each department should carry out a risk
assessment by looking at the organization's exposure to fraud risk occurrences. The internal and
external surroundings will change; thus it is unavoidable that the evaluation will need to be
revised frequently to keep risks at a tolerable level.

The firm may choose to utilize a matrix, a narrative, or any other easy-to-understand format for
the fraud risk assessment. It should be shared with the Board of Directors and implemented
collectively by all stakeholders based on the likelihood and impact each risk will have on the
business.

Why Is a Fraud Risk Assessment Important?

Compared to the cost of committing fraud, doing fraud risk evaluations on a regular basis simply
necessitates a little investment. According to the ACFE's 2020 Global Fraud Study, global fraud
schemes cause yearly losses of more than $3.6 billion. An essential tool for businesses is a fraud
risk assessment, which helps them spot internal and external dangers before they have a chance
to negatively impact their reputation, legal exposure, or financial resources.

Businesses may develop a strategy to lower these fraud risks if they are aware of them. Even
while it is difficult to entirely eliminate all fraud risks, a fraud risk assessment is a powerful tool
for reducing the frequency and severity of such threats.