Fraud risk management has always been an essential part of the overall risk management process of companies regardless of the type of business or industry they do business in, though the amount of efforts to manage this risk differ depending on the type of businesses and industry sectors. However, in the context of the rapid increase in the use of technology in the current environment to improve the business, fraud risk management has become more difficult although the fraud management has always been a tough thing.

In the last couples of years digitalization was the “ buzz” word in every industry and more so in the Covid-19 era.  In order to be competitive in the business, and increase the ability reach customer faster and further,  businesses started embracing digital technologies in the areas of customer acquisition, product selections, receiving payments etc. Further, in the Covid stricken economy, reaching customers digitally was the safest way to do business amongst other things.

Many organizations that did not have a digital outreach mechanism failed or will be prone to fail during the pandemic. Learning from the pandemic almost every organization seem to have determined to improve customer experience tapping into digital technologies. Before the pandemic, digitalization was seen as a “good thing to do”, but the pandemic made it a survival mechanism rather than Luxury.

The common understanding is that companies tend to stop all discretionary spending during a period of a pandemic or economic downturn due that to whatever reason might have caused the downturn. Cost-saving and being economical in whatever companies do is the norm, except that their investments in digital technologies and this does not come as a surprise to many of us who know about the benefits of engaging customers digitally.

With the increased level of digitalization in companies due to the reasons mentioned above, remote processing of transactions,  digital processing of payments have become the new normal makes it easier for fraudsters and cybercriminals to perpetrate frauds. Customers are becoming digitally literate as to how to transact digitally, however, it does not mean that they can understand the nuts and bolts of the risks they are facing.

Therefore, it is incumbent upon the companies to ensure systems are capable of identifying the vulnerabilities and flag them out before unfortunate things happen that would not only lose money but the reputation of the brand too.

In the context of digital what was mentioned above, manual prevention methods become less relevant, and not practical and those methods have become outdated and redundant. Companies also will need to start looking at fraud management with the use of digital tools, and fraud management has to be on a real-time basis as opposed to identifying frauds after they have occurred.

There are two areas which will be key to fraud management in the digital economies in the future which are briefly discussed below. Without these two areas working in coordination, the effectiveness of the future of fraud management will be at crossroads.

When it comes to digitalization of businesses and moving to the internet to look for customers and facilitating a seamless customer experience to win the battle of winning the customers, one more thing corporates have to remember, but most of the time forget is that there will be an increased amount of fraudulent activities through digital technologies and the connectivity to the internet. Fraudsters are getting more sophisticated with their attacks, so companies must pay greater attention to manager digital frauds with digital tools.

Companies have to focus on the tools that incorporate AI, Machine Learning, big data concepts without just limiting to rule-based fraud identification mechanism only. Further, reporting of fraud red flags and fraud incidences have to be on a real-time basis to stop preventing fraud in the first place since detection only will not be the solution due to the inherent issues that digital transactions pose due to speed with transactions are processed without a proper audit trail.

Historically anti-fraud professional did not have to have sophisticated knowledge in the digital technologies to understand how fraud happens and how they can be identified and prevented. With ever-increasing digital technologies and the fact that companies have to invest in digital tools to manage frauds,  it would be fair to say that fraud management is unthinkable if the anti-fraud professionals are not digital literate or they do not keep up to date on their level of knowledge in these areas.

The invention of the fraud management tools have been much faster now compared to several years ago in part due to the increased demand from companies, however, the issue that has been witnessed is that the people who are in charge of using those tools and managing tools are in many cases, not equipped with the adequate knowledge of the subject matter to be able to do the task efficiently.

Therefore, it becomes vital for companies to start investing in employees who are digitally literate when they staff forensic teams. In many cases where companies tried to educate old fashioned forensic professional with the new knowledge, I have reminded the old saying “ you can’t teach an old dog new tricks”. Hence, to achieve success in fraud management in the digital era, companies need to think about the level of risk management, level of Cybersecurity knowledge in the people they hire.

If not, mere investment in the digital tools with the latest technology in fraud management would not yield the expected results and expectations of such investments.