Crisis Management and Fraud Response Strategies

Rise in fraudulent transactions and behavior across the globe

The main question posed coming out of my training on “Crisis Management and Fraud Response Strategies” to an international audience was: how does a company actively put steps in place to prevent or reduce the likelihood of fraud and embezzlement in their organization, prepare for it as a potential crisis, record and maintain the right information as evidence should it occur, recover from it while dealing with possible public scrutiny?

To begin with, Crisis Management and Fraud Response Strategies are a combination of both proactive and reactive measures designed to protect, prepare, detect, respond to, and recover from any event that threatens an organization’s financial, reputation, and operational continuity and stability. For individuals who are forensic accountants and risk professionals, these disciplines intersect through the identification, investigation, and mitigation of financial misconduct or systemic weaknesses with an organization. According to PwC’s 2022 global survey, 46% of organizations reported experiencing fraud or economic crime over the prior 24 months. According to a 2025 report by TransUnion, companies globally lost on average 7.7% of their annual revenue to fraud in the prior year.

These statistics show the crisis that many organizations face on a yearly basis. A crisis is any situation that threatens any organization and requires a timely and adaptive response to protect lives, property, resources, and the environment. ISO 22301 (Business Continuity Management System) describes Crisis Management as “coordinated activities to lead, direct, and control an organization with regard to crisis”. The overall goal here is to coordinate the organization’s response effectively to avoid or minimize damage to its profitability, reputation, and ability to operate. There are different types of crises, such as; cybersecurity breaches, corporate fraud or embezzlement, reputational scandals, natural disasters e.g. hurricanes, earthquakes, flooding, etc.

Fraud Response Strategies are coordinated actions taken after a fraud incident is suspected or detected to minimize damage, recover losses, and prevent recurrence. In the event fraud were to occur within an organization, the goal now becomes or must be to protect the organization’s integrity, ensure legal compliance, recover resources, and restore trust among their various stakeholders.

Integration of Crisis and Fraud Response

It is important to note that a fraud incident is both a financial crime and a crisis event requiring cross-functional management between finance, legal, communications, and leadership teams. This is the key link, or rather intersection, between fraud and crisis management. There are some key phases that will apply to both areas of fraud response and crisis management for an organization to establish a team to handle these situations, should they occur. These phases are:

Detection of the actual fraud: Companies must have systems in place to detect when a potential fraud is occurring immediately. For example, using data analytics or software to alert and trigger anomalies, establish certain thresholds that may indicate fraud, have a whistleblower program in place, perform regular internal and external audits, and develop potential red flag indicators.
Containment of the crisis: The organization needs to limit any further damage by taking actions such as suspending transactions, activating a crisis team, securing its IT systems, and preserving all evidence.
Investigation of the fraudulent incident: The team must start doing a forensic accounting review by looking at the information, conducting interviews with the necessary persons to verify details, and performing digital forensics, should it be deemed necessary.
Reporting: The reporting phase involves informing persons only on a need-to-know basis. The Crisis Management and Fraud Response Team should coordinate with legal counsel and senior management on how best to proceed in terms of relaying information to persons internally and externally. If a senior management person is involved as part of the investigation, that person should not be alerted and involved with the overall investigation except to interview them to gather information. If required, ensure compliance with the law by informing regulators and contacting law enforcement as needed. Communication during this stage is key to ensuring all stakeholders (i.e., both internally and externally) who need to know are both identified and informed immediately after the event via the proper channels.
Recovery: The organization must start the process to recover as much of the finances as possible once fraudulent activity has occurred. As soon as the evidence has been secured via the chain of custody (which has its own separate process and procedures), determining how best to seek restitution from the fraudsters is the next step. If the organization has insurance for these types of activities, filing a claim and getting the payment from the insurance company will be the next step. Additionally, pursuing all forms of legal action to either have the persons brought before the courts and be held accountable via imprisonment or restitution based on the laws of your jurisdiction is the next step.
Review: Remediation: Strengthening controls, updating policies, and retraining staff.

Finally, after all information has been gathered regarding the fraudulent activity and the required stakeholders have been informed appropriately, an in-depth look has to be done about the controls that need to be either put in place or strengthened to ensure that the incident does not happen again. This can involve either adding new controls or procedures or altering them to become stronger. Fraud policies will need to be evaluated and revised. All staff members will have to be retrained in terms of new processes or procedures, while creating a new level of awareness of no tolerance for fraud among everyone.

Cross-Functional Teams

In order to combat fraud in an organization and reduce the possibility of collusion, cross-functional teams have to be created with specific roles to assist in preventing and reacting to different fraud events. This team must meet and practice the steps to perform should fraud occur within an organization. Some of the team members could be a Crisis Manager or Incident Commander to oversee the strategic response of the team.

The Information Technology or Cybersecurity team to secure the systems and provide digital evidence. The Forensic Accounting team that will conduct fact-finding and loss quantification. The Legal Counsel, which will provide advisory to ensure regulatory and evidentiary compliance. The Corporate Communications team which will manage both internal and external messaging and communication. The Human Resource department that will manage disciplinary and ethical actions. The Finance/Accounting department that will provide information on anomalies in the system of the financial records either proactively or on request from authorized parties.

Fraud Prevention Strategies

It is imperative that steps must be taken to develop preventative fraud strategies to prevent the incidents beforehand. Firstly, the organizations must create an ethical culture where the mindset, tone, and actions of top management have a high degree of honesty, integrity, and no tolerance for fraud or any type of wrongdoing. There should be compliance programs established within the organization such as Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT), and Countering Proliferation Financing (CPF). In essence, there must be a combination of employee training and awareness programs to develop anti-fraud strategies. Certainly, there must be segregation of duties for processes and the requirement of at least two signatures to approve certain transactions as a main part of prevention.

Policies must be created e.g. fraud prevention policy, code of ethics and conduct policy, whistleblowing policy, incident reporting policy. To further strengthen the process, Human Resources (HR) can perform appropriate background checks to ensure persons do not have a history of committing fraudulent activities during the hiring process for all prospective employees.

The implementation of the following frameworks is critically important as part of an organization’s overall Fraud Prevention Strategy:

ISO/IEC 27001 – Information Security Management System
ISO 31000 – Enterprise Risk Management (ERM) framework
ISO 22301 – Business Continuity Management System
COSO Framework – Internal Control and Risk Management to prevent fraud
ACFE (Association of Certified Fraud Examiners) – Fraud Investigation Standards
Crisis Communications Strategy and Plan – Transparency, accuracy, timeliness, etc.

Always Duplicate/Backup Data

Importantly, maintain excellent record keeping regarding your data and information at different intervals, so you can always return to prior dates to do any type of verification, check, comparison, and investigation.

Conclusion

A combination of both preventative and fraud response strategies must be employed for an organization to prepare, protect, respond to and recover from any type of fraud. This combination must be linked with their Crisis Management strategy to manage the situation in a professional manner should any fraudulent activity occur and enter into the public domain.

Different crisis scenarios have to be devised and practiced internally, with the right team in place, to avoid long-term reputational and financial damage to their stakeholders. Some of the preventative fraud strategies include implementing ISO/IEC 27001 (Information Security Management System) for your internal controls, using ACFE Fraud Investigation Standards and having a proven and tested ISO 22301 (Business Continuity Management System) in place to resume business operations in the event of any unauthorized behavior.

To support this approach, the post fraud response strategies should include a cross-functional team that performs the following: detect the actual fraud, contain the crisis, investigate the fraudulent incident, report and communicate the necessary information to appropriate stakeholders based on a need to know basis, perform recovery and business continuity of your operations, review and remediate any areas of weakness in order to strengthen them with new future controls.

Once these steps have been fully implemented and reviewed annually, it will help to greatly reduce, if not eliminate the potentiality of fraud in your organization.

As threats evolve globally, at N Ramsey Consultancy Ltd, we continue to support organizations with: