Page 12 - RMAI Bulletin July 2024

RMAI BULLETIN JULY 2024

ened levels of fraud, including cyber fraud, as crimi- Consideration:
nals attempt to exploit the COVID-19 pandemic. Conducting rigorous stress tests and considering hypo-
thetical scenarios to assess a firm's ability to weather
Following recent announcements of emergency mea- an economic downturn can then help it improve effi-
sures, there are likely to be significant numbers of ap- ciency and productivity and find investment alterna-
plications from both individuals and businesses to ac- tives.
cess support schemes. Claims may be made fraudu-
lently, but processed rapidly, with less stringent controls 3. Cyber Attack/Data Breach:
than usual. If approved, funds may be transferred rap-
idly and with the whole system under stress, recover- The Risk:
ing funds due to fraud may be a relatively low priority. Every organization is vulnerable to cyber risk, and in-
dustries relying heavily on digital technology to in-
The risk of internal fraud will potentially increase due crease efficiency and competitiveness are in particu-
to remote working and associated reduced oversight lar danger.
and challenge.
Considerations:
Considerations: Every level of an organization must understand the
a. Employing predictive modeling: Data and potential impact of a cyberattack and data breach and
analytics could improve organizations' understand- then work cross-functionally to address those risks.
ing of consumer and identify factors and elements Businesses should consider adopting a comprehensive
that can help prevent future fraud. The goal is to approach to cyber threats to continually assess their
detect potential fraud as early as possible in the risk profiles, address vulnerabilities and proactively
claims process and thus reduce payments made to fortify cyber defenses.
fraudsters.
b. Using business rules to detect irregularities: Busi- 4. Cash Flow/Liquidity Risk

ness rules can allow for the identification of The Risk:
anomalies or irregularities during the processing An event impairing an organization's cash flow or li-
of claims. quidity can leave the business unable to meet short-

c. Social Network Analysis: Social network analysis or intermediate-term obligations. Cash flow risk can be
has proven effective in identifying organized fraud attributed to economic uncertainty and financial mar-
activities by modeling relationships between en- ket volatility.
tities in claims. For example, social network analy-
sis might show a high activity account with links Considerations:
from many accounts, or a low-activity account Industry experts recommend that companies con-
with strong links to a master account. It might cerned about cash flow risk should seek to monitor
reveal multiple. and maximize their cash positions.

2. Economic Slowdown Organizations should also implement controlled cash
The Risk: management systems; either decrease or pause
Many economists believe world recession is in the spending, instead focusing on cash inflow; diminish
cards by the end of 2021. But due to Covid-19, we are working capital; and attempt to improve their finan-
cial structures and funding options.
already entered into recession phase. Such a slowdown
could hit businesses all over the world as declining
trade, reduced earnings, cuts in capital spending and 5. Millennials in the Firing Line
slowed real estate activity start to bite. An economic The Risk:
slowdown could also fan the flames of trade wars and Within this challenging economic and political environ-
geopolitical risks - or vice versa. ment, the millennial generation is likely to be the hit

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