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3 Ways You Should Manage Finance Security and Risk

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Finance Insights for ProfessionalsThe latest thought leadership for Finance pros

Thursday, January 2, 2020

How can you ensure your business is protected against the risk of financial fraud? Here are three key steps.

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Reducing risk and improving financial security should be a top priority for every CFO. With the tactics used by fraudsters constantly changing in order to evade detection, it can feel like a constant battle to ensure that businesses are protected against criminal activity.

This is no easy task, and finance teams will have to balance several competing demands to keep the business safe from harm without disrupting essential activity such as payment. So how can teams go about protecting their finances from risk? Here are three key areas you need to be focusing on.

1. Secure your payments

Payment fraud is one of the most common types of issues affecting many businesses, and if you don't have the right systems in place to detect these transactions and block them before they’re completed, it can prove highly costly to a business.

This has become a particular challenge in today's environment, where real-time payments have become the standard way of operating for many people. With many firms now using multiple channels and payment types to both make and receive payments from customers and suppliers, it means finance teams need to manage a wide-ranging, complex payments environment.

To meet these demands, solutions that can track payments in real-time and proactively block suspicious transactions will be a must. This is always a tricky balance for finance departments - make the defences too robust and a high number of false positives could disrupt normal business activity and frustrate genuine customers, but solutions that are too lax are likely to let fraudulent payments slip through.

2. Monitor your activities

However, effective monitoring solutions shouldn’t start and end with transactions themselves. Any good finance security strategy should also have a strong analytics solution in place that not only scrutinizes external activities, but also keeps track of every action that’s taking place within the business that could be an indicator of fraud.

For instance, user behavior tools that can spot activities that diverge from the norm in real-time should be a key tool in minimizing financial risk. Adopting software with features such as rules-based detection can allow finance leaders to set their own specifications for what activities are considered a normal part of operations, which should be passed to a human observer for further scrutiny, and which should be blocked immediately.

Tools such as machine learning can be hugely beneficial for this, they can build an idea of what normal businesses operations look like, as well as allow organizations to keep up with the latest fraud tactics. This helps reduce the rate of errors and leaves finance teams free to focus on other areas, while still ensuring that anomalous events are reported and acted on as soon as they arise.

3. Ensure your compliance

When dealing with payments there are a range of compliance requirements that every business needs to be aware of. By following all these closely, you can greatly reduce your exposure to financial risks - and give some protection should you still end up falling victim to fraudsters. You can never guarantee 100% security, but in this case, being able to prove you’ve met your responsibilities and not engaged in any careless or negligent behavior ensures you limit your liability and reduce the threat of regulatory action.

For example, if you’re taking card payments, it's vital you’re familiar with the 12 PCI DSS requirements set out by the Payments Card Industry Security Standards Council. These steps cover everything from building a secure network to regularly testing your processes.

Importantly, if you or your customers do fall victim to fraud and you're found not to be in compliance with these rules, you can face heavy fines of up to $100,000 a month, or even have your relationship with your bank or payment processor terminated, leaving you unable to accept payments and maintain cash flow.

Elsewhere, activities such as due diligence, anti-money laundering (AML) and know your customer (KYC) operations are all essential in ensuring finance security and should be made a top priority, especially for transactions that will be outside the norm.

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