What the Wirecard Scandal Has Taught Us About Fraud Detection and Risk Assessment

The recent scandal involving German payment processing firm Wirecard has put a spotlight on the importance of fraud detection and risk assessment. Over the past few years, Wirecard had become one of Europe’s hottest tech stocks, with its stock value soaring to more than $28 billion. However, in June 2020, it was revealed that the company was not only facing an accounting scandal but also potentially fraudulent activity.

This scandal has highlighted some key lessons for all companies when it comes to fraud detection and risk assessment. Let’s take a look at what we can learn from this high-profile case.

The Need for Robust Risk Management Systems

One of the key lessons from the Wirecard scandal is that companies must have robust risk management systems in place to detect any potential fraudulent activity. Companies should have processes in place to identify red flags early on and respond quickly if they are identified. Risk management systems should also be regularly reviewed and updated to ensure that they are able to detect new types of fraud as they emerge.

Importance of Internal Auditing

The other lesson from this case is that internal auditing is essential for detecting fraud. Internal audits provide an opportunity for companies to review their internal controls and processes, which can help uncover any risks or irregularities that could lead to fraudulent activities. Companies should ensure that their internal auditors are adequately trained and experienced in identifying potential fraud risks, so that any irregularities can be quickly identified and addressed before they become a bigger problem.

Adopting Technology Solutions

Finally, companies should consider adopting technology solutions such as artificial intelligence (AI) and machine learning (ML) tools to strengthen their risk management processes. AI-based tools can help automate many of the manual tasks associated with risk management, making it easier for companies to identify potential risks earlier on. ML tools can also be used to continuously monitor data points related to financial transactions, allowing companies to spot anomalies quickly before they become a problem.

The Wirecard scandal has shown us just how important it is for companies to have robust risk management systems in place, as well as strong internal audit practices and technology solutions such as AI and ML tools in order to detect any potential fraudulent activity early on. By taking these steps, companies can protect themselves against significant losses due to fraud or other criminal activities — something which Wirecard clearly failed to do! Now more than ever it’s critical for businesses of all sizes—large corporations or small businesses alike—to invest in effective audit measures including implementing appropriate technology solutions where necessary.

Avoid becoming the next Wirecard with proper protocols and risk management in place for your financial services or fintech organization. Learn more about Connected Risk’s Risk Management solutions and sign up for a free trial today.

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