All-in-one Risk Management Platform

Fraud Risk Factors

Fraud is a risk that all companies face and most companies are aware of - to some degree. However, they may be less aware of all the types of fraud and the risk factors that make them predisposed to experience it. We'll discuss that all below.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Join thousands of companies who build trust with Accountable.

Fraud Risk Factors

Renowned companies falling victim to scams and fraud is something we all have heard in the news at some point in our lives. But have you ever thought about the factors involved that lead to such an incident? 

Of course, the primary factor is a weak security system. Fortunately, companies have found more advanced ways to protect their data, money, and ideas from fraudulent activities in the modern era. Still, some businesses fail to protect themselves completely. 

Companies may overlook a few fraud risk factors, resulting in a significant loss. This article will discuss the common fraud risk factors and their effects on the business. 

How Does Fraud Affect a Business 

A company's success depends on the right collaborations and a smart team of employees. But unfortunately, sometimes, these partnerships and employees can also become the reason for a company's downfall.

According to the 2020 Global Fraud Study published by the Association of Certified Fraud Examiners' (ACFE), companies lose around 5% of their revenue each year due to fraudulent activities. Most of these frauds are caused by weak internal controls and a lack of supervision. 

Several external factors pose a risk to the company's security as well. For example, hacking is one of the major problems businesses face in the modern age. Research shows that a hacker attacks an unprotected computer every 39 seconds

It puts the company's sensitive data at risk, costing them at least $3.92 million for each data breach. Not only that, but it also poses a major threat to the personal data of customers collected by companies to provide them with a more customized experience. 

These frauds can cause companies significant losses in terms of money. For example, ACFE shared in their 2018 Global Fraud Study that small businesses with less than 100 employees are at a greater risk of fraud than large corporations. They can lose up to $200,000 each time after a fraudulent activity which is two times more than what large businesses may lose. 

Common Fraud Risk Factors 

There can be a long list of factors involved that increase a company's vulnerability to falling victim to fraud. However, here are the most common factors that you can look out for: 

Lack of Check and Balance 

Constant checks and balances are important to keep shady employees and activities at bay. Therefore, having a team designated to control security and keep a check on all the activities taking place at work is key. 

The lack of checks and balances gives way to internal fraud in companies. Statistics show that around 75% of employees have confessed to stealing something from their office at least once. While 64% of employees frequently steal from small businesses, making them the most vulnerable to fraud. While these high statistics for employee theft don’t necessarily correlate with sensitive data fraud or theft, they are still an alarming number of people that may be willing to compromise a moral code for some level of pay out. 

Weak Internal or External Relationships 

Weak relationships of employees with their company can also result in fraud. Other than that, weak partnerships can also be the main reason for losing a considerable amount of money or data to fraud. Employees and vendors can also work together for their financial interest resulting in a loss for the company. 

There should be a designated team lead for each project and partnership who is appropriately trained to follow the security processes to avoid this problem. Managers should also have firm control over the employees to prevent such actions.

“Saved our business.”
"Easy to use!"
"Accountable is a no brainer."

Get started with Accountable today.

The modern platform to manage risk and build trust across privacy, security, and compliance.
Get Started Today
Join over 17,000 companies who trust Accountable.

Insufficient Pre-Employment Screening 

Companies often hire individuals without a proper screening of their backgrounds. It usually happens among small businesses with fewer means to run such background checks on their employees or vendors. They can lose a massive sum of money or data due to this. 

Even if the employees do not engage in colossal fraud, they can waste some business resources. One bad hire can cost up to $15,000 on average to a company. Therefore, it is essential to run proper screening on an employer's background and capabilities before welcoming them into the office. 

The Dominance of an Individual

Handing power to an individual, especially in terms of money, can result in monetary fraud. According to ACFE, 35% of fraud is committed by people in managerial positions. It shows the importance of hierarchical checks and balances in the company. 

Giving complete authority to one or a group of few people can be the reason for the downfall of a company. Therefore, an entire group of compliance teams should be trained to follow proper security rules to prevent fraud. 

Accounting is Not the Only Department at Risk 

There is a common misconception that fraud only includes the theft of money. However, accounting is not the only department affected by fraud. There are different ways that your company can lose its value and eventually face a downfall. 

For example, the theft of data is also a major loss. This is a type of fraud that is less often discussed, but can open the company up to a world of risk that is extremely compromising. In order to protect from data fraud, be sure to have adequate data security measures in place, in addition to to properly training any and all employees who have access to this information. 


Companies can lose their valuable data, ideas, and money to fraudulent activities. Unfortunately, despite increasing awareness, such activities continue to happen each year. It not only affects the owners of the business but also the employees working in the organization. 

Therefore, using fraud protection software and consulting with data protection agencies like Accountable HQ is ideal for your company's best interest. With the right strategies, careful audits, and complete data protection, your company can thrive in no time. 

Like what you see?  Learn more below

Fraud is a risk that all companies face and most companies are aware of - to some degree. However, they may be less aware of all the types of fraud and the risk factors that make them predisposed to experience it. We'll discuss that all below.
How to Respond to a Breach or Cyberattack
CMIA (California Confidentiality of Medical Information Act)
What is a HIPAA Compliance Checklist?
Ten Common HIPAA Compliance Mistakes and Effective Strategies for Mitigation
Safeguarding Your Business: Preventing a Data Incident
What is Personal Data under the GDPR?
Streamlining the Employee Off-boarding Process
Traits and Responsibilities of a GDPR Data Controller
ISO 27001 vs HIPAA
Complying with Texas HB300
Contractors Under CCPA/CPRA
Why was the CCPA Introduced?
HIPAA IT Compliance Checklist
How to Secure Your Company's Email Communication: Best Practices and Strategies
Complying with ISO 27001: Strategies and Best Practices
GDPR Compliance for Startups
What is Personal Information Under the CPRA?
Steps to Ensure Operational Resilience
The CCPA Do Not Sell Requirement
Am I a Data Controller or Data Processor?
Service Providers Under CCPA/CPRA
Why Security Does Not Equal Data Privacy
What Does PHI Stand For?
Common GDPR Compliance Mistakes & Pain Points
"Likely to Result in Risk" Under GDPR
Key Elements of a Data Processing Agreement
What Is a Data Processor?
What is a Business Associate Subcontractor?
What You Need To Know About Browser Cookies
How Long Should You Retain Personal Data?
Operational Risk Management
ADPPA Preview
What is a Data Controller?
Data Protection Impact Assessments (DPIAs)
The Importance of Monitoring External Data Breaches
Fraud Risk Factors
Security Awareness Training
5 Steps to Creating a Vendor Management Process
The 18 PHI Identifiers
Notice of Privacy Practices under HIPAA
Data Subject Access Requests
What is a HIPAA Lawyer?
What You Need to Know About Data Encryption
ISO 27001
Types of Financial Risk
SOC 2 Compliance Mistakes
Data Disaster Recovery Plan
The Truth about Data Security
Business Continuity Plans
Security Risk Assessment Overview
How To Comply With the HIPAA Security Rule
How To Ensure GDPR Compliance
The Complete Guide to PCI Compliance
Data Governance in Healthcare
Why is Personal Data Valuable?
8 Steps To Establish a Risk Management Framework
How To Prevent a Former Employee From Becoming a Security Risk
Vendor Risk Management
4 PCI DSS Compliance Levels
The Difference Between DoS and DDoS Attacks
Internet of Things (IoT) Security
Compliance as a Competitive Advantage
SOC 2 Compliance
Opt-In vs. Opt-Out Data Rights
Five Principles of Risk Management
5 Habits of an Effective Privacy Officer
Principles of Data Governance
Data Protection Officer vs. HIPAA Privacy Officer
Personally Identifiable Information (PII)