Outsourcing – are we heading in the right direction?
The 2016 ACFE Report to the Nations on Global Fraud indicated that a typical organisation loses 5% of revenue each year through fraudulent activities.
In South African terms it translates into fraud losses of nearly R262 billion per annum; a phenomenal potential increase of R71 billion in company tax collection if we could prevent fraud within all organisations in South Africa.
Modus operandi of opportunists
According to the report, 91.6% of fraud was detected through internal departments – an effective anti-fraud control if operated and supported by highly skilled investigators and state of the art technology. The presence of anti-fraud controls was correlated with lower losses and quicker fraud detection. It is further noted in the report that proactive data monitoring was associated with 54% lower losses and fraud was detected in half the time.
The modus operandi of opportunists and syndicates, defrauding financial organisations is highly adaptive and continually evolving. It is important for any organisation to adapt faster than the fraudsters by employing cutting-edge tools and making fraud prevention and detection an integral part of every point in the transaction chain.
Outsourcing is promoted as one of the most powerful strategies if the outsourcing arrangement is managed and governed to:
• Support the organisation’s anti-fraud control measures already in place;
• Extend an organisation’s ability to prevent and detect fraud through additional control measures; or
• Act as an independent and objective anti-fraud control measure.
Benefits of outsourcing
The benefit of outsourcing includes financial savings if a cross-subsidiary model is followed by the outsourced business partner. Organisations can focus on core business strategic issues while having access to technology and specialised expertise in terms of fraud prevention and detection.
This approach will give the organisation the advantage of instant rapid low cost innovation without making use of internal resources responsible for day to day operations.
Proactive and reactive data monitoring is important within any organisation but can be more dynamic if it is supported by data across organisations within the same conceptual equivalence. Such data identifies new trends as well as re-appearing ones and indicates patterns amongst the different trends. It also anticipates new trends that can support prediction strategies in advance.
Don’t stand to fall behind
Some companies can cause irreparable damage to their business by outsourcing too early while other companies do not believe in outsourcing any of their functions and believe that home grown products and systems are always better. These companies stand to fall behind against more innovative competitors or insurance products by ignoring the opportunities available.
It is also true that some companies make use of outsourcing but use the wrong mix of activities, also causing serious damages to their business and causing trust issues to already proven outsourced business solutions.
It is true that there is risk involved when deciding to follow the outsourcing route. However, successful companies have on the other hand realised that it is rarely cost effective to develop internal processes, strategies and systems when there are professional companies with a proven track record available with highly effective systems, strategies and software necessary to prevent and investigate fraud.
A well-calculated risk
Successful implementation of such partnership is all about finding the right business partner who has the capacity, experience and skill to seamlessly integrate with existing internal strategies. Outsourcing should be treated as a well-calculated risk to enhance business opportunities and to provide advantage in the market in terms of claims administration, proactive and reactive fraud prevention. The preferred outsourced partner should support the company to innovate and generate the highest quality results possible.
Become the industry leader and leave your competitors in the wake in areas where innovation is critical. Take the first step towards innovation and outsource wisely.
