The explosion of data has introduced new issues for fraud investigators at companies across various industries. More transactions and data sources provide disgruntled employees and external con artists with new avenues of attack and thus pose more challenges for organizations trying to thwart them.
For many companies, fraud detection has traditionally resulted in fragmented efforts. When data was more manageable, a siloed approach to data analysis and processes seemed sufficient to troubleshoot and was relatively effective in recognizing the more common fraud patterns. An unrelenting increase in data volumes and more sophisticated fraud patterns, however, crumble this walled approach to fraud management; companies are struggling with the fact that there are too many systems to investigate, too many transactions to wade through, and far too much new opportunity for fraudulent activity to be conducted without immediate detection.
The dilemma that many SAP customers and prospects are facing is that they are becoming overextended just as C-level management is demanding that loopholes be closed. For example, a large utility company that recently became an SAP customer reported that it had a year-long backlog of data to analyze as part of its fraud detection efforts. This is fairly typical, and helps explain why fraud generally continues undetected for a median of 18 months, according to the 2012 Report to the Nations on Occupational Fraud and Abuse, a biannual survey conducted by the Association of Certified Fraud Examiners (ACFE).1 By the time fraud is detected, perpetrators are often long gone or losses are irrecoverable. According to that ACFE report, a typical organization loses roughly 5% of its annual revenues to fraud, so organizations need to take a long, hard look at fundamentally changing the way they approach fraud management.
A Consolidated View
Companies have long turned to new technology to fill in the gaps in their fraud management processes, but a comprehensive approach to fraud is incomplete without also aligning synergies among the various business units. If IT is focused exclusively on, say, identity theft management, while one business unit is concerned with employee theft and another on corruption, the potential for fraud remains as perpetrators attack the weak spots. Rather than operating in silos, SAP’s customers are now looking to take an enterprise approach to fraud management.
Recognizing its customers’ need to shift away from fragmented data and processes, SAP developed a next-generation fraud management solution as part of its portfolio of analytics applications. SAP Fraud Management adopts an enterprise-level approach to better detect, investigate, and deter fraud, and can be used in conjunction with other SAP solutions for governance, risk, and compliance (GRC) to build a stronger fraud prevention shield.
SAP Fraud Management is powered by SAP HANA, which enables speed and insight by capturing, searching, and analyzing data from multiple sources to provide a full snapshot of potential vulnerabilities in near real time. This is a key differentiator from the siloed approach, which could provide a similar all-encompassing view only by analyzing disparate data that first had to be sourced, akin to looking for trends without really knowing what you’re looking for.
Next-Generation Fraud Management
SAP HANA helps solve this dilemma, giving organizations the power to detect and prevent fraud as it happens. This is because a company can integrate SAP Fraud Management with its SAP ERP system, for example, for real-time transaction analysis. With pre-set rules determined by a full analysis of historical data, analysts can stop potentially fraudulent transactions before more damage occurs. By integrating SAP Fraud Management with the predictive analysis capabilities of SAP InfiniteInsight, companies can begin to predict how and why fraud occurs and see possible fraud patterns before they take root, giving them sophisticated, powerful tools to match wits with increasingly sophisticated criminal tactics.
The enterprise approach enabled by SAP Fraud Management helps eliminate widespread damage caused by fraud with cutting-edge prevention and detection tools that keep predators at bay.
Now, with the agility and insights provided by SAP HANA, key stakeholders with the best understanding of where fraud occurs, such as finance, audit, or compliance teams, can tell IT exactly which controls are needed, using real-time analysis to help anticipate where fraud might occur rather than reacting to when and where it already has occurred. SAP HANA also allows for flexibility in overhauling detection rules on the fly as circumstances or new data dictate.
This agility is also reflected in improved alert management tools at the dashboard level. The solution’s calibrator tool can then take these rules and run a simulation of the new rule set against historical data before they are deployed. This can drastically lower the incidence of false positives and maximize the impact of an alert system. The tool also helps investigators prioritize their work by providing them with better insight into the impact of suspicious activity.
A Dashboard View of Fraud
With SAP Fraud Management, organizations are limited only by their imaginations for how robust and comprehensive they want their GRC platform to be. To take one example, insurance companies devote massive resources to combat false claims. SAP Fraud Management can pull external unstructured data to help investigate suspicious personal relationships, weeding out nefarious claimants (see Figure 1).
A simplified case management approach at the user interface level helps organize investigations and fraud cases. A user can find all information related to a specific case in one intuitive interface, with dashboards helping dissect the relevant information, such as the parties involved, geographical information, and the types and amounts of transactions. Ease of use was a key consideration in the development of SAP Fraud Management. At workshops prior to the solution’s general release, SAP received very positive feedback from potential customers about the user interface; many reported that it would greatly simplify existing case management organization tools, which tended to rely on manual processes.
The Danger of Inertia
The very real risks of employee fraud schemes such as theft of tangible or intellectual property, collusion, and improper disbursements explain why a recent survey of North American and European business decision makers responsible for employee fraud management reveals a high level of adoption for employee fraud management technology solutions.
Conducted by Forrester Consulting and commissioned by SAP and Deloitte, the survey reveals that more than half (56%) of respondents either have adopted or expect to expand employee fraud management solutions.2 SAP believes that this indicates that the respondents are unwilling to pay the price for ignoring one of the cornerstones of a robust fraud management platform.
With tools to both help prevent fraud as well as detect it sooner rather than later, SAP Fraud Management makes it more difficult for potential fraudsters to operate, to the point where having such a comprehensive system in place can act as a deterrent. Unlike a fragmented approach that invites side-door corruption, the enterprise approach enabled by SAP Fraud Management helps eliminate widespread damage caused by fraud with cutting-edge prevention and detection tools that keep predators at bay.
For more details on SAP Fraud Management, visit www.sap.com/fraud.
1 Association of Certified Fraud Examiners (ACFE), “Report to the Nations on Occupational Fraud and Abuse” (2012; www.acfe.com/rttn-archive.aspx). [back]
2 “Strategically Detecting and Mitigating Employee Fraud,” a March 2014 commissioned study conducted by Forrester Consulting on behalf of SAP and Deloitte. [back]