By Arun Chauhan founder and Director, Tenet Compliance & Litigation

Fraud continues to pose a major threat to many industries throughout the UK. From professional services and housing associations to sports and food, almost every sector is subject to fraud.

Concerningly, Cifas' Fraudscape 2019 identifies how fraud is on the rise.
2018 saw a 6% increase on the previous year, with mule activity increasing by 26% and instances of identity fraud increasing by 8%. So, with fraud in the ascendancy, what can businesses do to lessen their risk?
Leadership
A fundamental - yet often overlooked - influencing factor of fraud within any business is its leadership.

Your leadership plays a vital role in your culture. Leaders have the ability to either make or break the culture of their team and therefore drive behaviours.

Leaders who instil a positive culture will often enjoy a highly engaged, motivated and protective team. Poorly-motivated leaders can - albeit unintentionally - put their business at high risk of fraud or other dishonest activity.

Poor leaders can create a toxic working environment by setting unattainable performance targets, focusing heavily on KPIs or demonstrating a maximum tolerance for small wrongs. This saps the heartbeat of successful teams.

But if your organisation isn't projecting a culture of trust, you're putting yourself at high risk of driving disenchantment - a key red flag of insider fraud which many are unaware of.
Employee behavior

Leadership has been proven to correlate closely with employee behaviour. Living a true cause for your organisation, which people understand and buy into, can be highly valuable to engagement. 

As a leader, you want to create trusting teams in an environment people want to be a part of. Getting that process right can lead to surprising results, seeing people exceeding both personal and team targets.

However, when leaders focus on the bottom line and shareholder values, you can lose the very people who are taking you forward.

Losing team motivation can lead to a series of negative outcomes, not least stress and a lack of engagement. Employee focus then turns to self-preservation. This can lead to behaviours which are usually out of character - the kind of actions good leaders would not turn a blind eye to.

 Engagement is now recognised as key to a successful business. When employees are engaged, the threat of internal fraud is likely to be lower. Without genuine engagement, team members can become emotionally drained, demotivated and disenchanted. Combine those factors and good employees can take steps to self-protect which often is the onset of employee fraud.
Protecting your business
Brands prosper or fail on the strength of their leadership. 

Leaders have the ability to either align or disconnect the moral compass of their team to that of the business.

Nowadays, businesses focus on governance and compliance but these are the secondary line of defence to fraud and wrongdoing.

The first line of trust is achieving employee engagement as then your team will help protect your organisation, buying into your rules on governance and compliance. Explicitly telling people not to do certain things can project a lack of trust for your team to work on their moral initiative.

Mitigating your organisation's fraud risk is all about instilling a positive culture which promotes information sharing and whistle-blowing.

For more information as to how you can act to better identify, prevent and deter fraud within your business, visit www.tenetlaw.co.uk or email arun.chauhan@tenetlaw.co.uk. Arun is a regular speaker and commentator on leadership and its impact on internal fraud