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Enterprise Fraud Strategy, Vision and Reality

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:

  1. Level and Type of Investment
  2. Savings from Loss Avoidance
  3. Savings from Operational Streamlining
  4. 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.

Category: Fraud