As the financial industry expands its products and offerings, the opportunity
for fraud has increased. As a management consulting firm in the industry,
Bridgeforce has been involved in discussions with many organizations and
industry stakeholders regarding fraud management.
Many firms are reorganizing around an “enterprise fraud strategy”
that coordinates efforts across the entire organization. Institutions
face conceptual challenges while moving to an enterprise fraud strategy
including justifying the move and planning the steps to completion. What
follows is a high level overview of the vision of enterprise fraud strategy
as well as the effective implementation.
Planning an Enterprise Fraud Strategy
The goal of enterprise fraud strategy is to create a framework for the
use of fraud resources across the organization. The framework can consist
of a centralized fraud-fighting group, or having individual units perform
most of the fraud functions under the direction of a central authority.
The main drivers behind enterprise fraud strategy are:
- Increased Effectiveness – A defined framework helps organizations
prioritize fraud interdiction efforts by enterprise risk, rather than
by product or account-level risk. Integrated tools and analysis can lead
to early detection of enterprise-level fraud risk, allowing for interdiction
efforts to have maximum impact. This can result in decreased losses, reduced
reputational risk, reduced operational risk, and reduced regulatory risk.
- Increased Operational Efficiency – A coordinated enterprise-wide
strategy can offer many potential savings by using technical and human
resources for maximum impact. Potential opportunities include: pooling
of data integration resources, sharing of software and platforms, common
methodologies and human resource efficiencies.
Often, the first step towards an enterprise fraud strategy is informal
cooperation between individual lines of business. This enables information
sharing and effective communication. Institutions can face a number of
challenges to achieving full enterprise-level fraud management, including
resource limitations and operating differences (differences across region,
differences across lines of business, differences due to acquisitions).
“Siloed” lines of business only multiply these challenges.
When developing a business case for investing in an enterprise fraud strategy,
the following four components should be considered:
- Level and Type of Investment
- Savings from Loss Avoidance
- Savings from Operational Streamlining
- Validating the Business Case
Executing an Enterprise Fraud Strategy
There are many aspects to consider when executing an enterprise Fraud Strategy.
- Data Integration
- Fraud Detection Methods and Models
- Alert Management
- Evaluating Results
- Budgeting and Control
Fraud Strategy Models
In general, there are three main models for enterprise fraud strategy.
In the fully centralized strategy, all fraud functions are centralized
in a single team. In the regional centralization strategy, functions are
centralized across specific geographic regions. In the centralized oversight
strategy, most of the tactical functions remain with the lines of business,
but under centralized oversight.
These strategies are detailed in the
full-length PDF version of this white paper available for download above.