Fraud Risk Assessment of Business Organizations


The following study is based on an assessment of fraud risk factors that are related to human, social, technological, political, and economic aspects. The evaluation of critical operational issues in different organizations is undertaken with a view of enhancing efficiency, creativity, and innovativeness in the organizations. The structure of the essay is focused on separately analyzing fraud risk factors in every organization. Every section begins with a brief description of a given organization followed by the examination of relevant risk factors and how they can be mitigated.

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DynCorp International

DynCorp International is a global security service provider that focuses on upholding high-level security standards. The company is faced with a number of risk factors. As a private United States military security contractor, DynCorp International faces a high probability of poor recognition of expenditure, fraud by employees, unauthorized transactions, misclassification of accounts and lack of a more practical strategic plan on risk management, inability to streamline its security policies and the existence of poor intelligence services. The risks are in line with numerous security threats that are usually associated with the provision of security services in an uncertain business environment. Intelligence services should be employed in mitigating such risks. The loss of its contractual agreement with the government would imply that DynCorp International would experience a reduction in its revenue and an overall decrease in its sales and profit margins. Consequently, the firm would lose the financial ability to fund its core operations. Though crucial, auditing has the risk of resulting in excessive government taxation. The use of financial consultancy and a concrete knowledge base on the matter is equally vital.

The nature of the organization, various internal and external controls, ethical values, and ethos of business operations, and the specific business environment shape the manner in which the organization operates. Risk factors such as lack of transparency in all business engagements, ineffective business strategies, corruption, futile business processes, and constant external factors such as insecurity have continued to play a critical role in reducing the level of efficiency and cost-effectiveness in DynCorp International. Poor application of accounting principles and the likelihood of internal wrangles among top-level managers would be a sure indicator of a possible occurrence of disasters and possible risks. The situation would be worsened by poor communication with other U.S state agencies, change in the U.S government outsourcing trends, and a shift in the country’s political climate.

Alliance Data Systems Company

Alliance Data Systems Company is the most comprehensive and largest provider of data-driven and transaction-oriented business solutions that focus on large scale consumer-based organizations. Fraud risk assessment is, therefore, important to the company’s operations. Alliance Data Systems Company usually undertakes bulky money transfers. Money laundering and robbery are, therefore, two major risk factors. The use of anti-fraud security or a consultancy agency would be a perfect means of monitoring the company’s business engagements, enhancing a more controlled business environment, and curbing the probable occurrence of the risk. Inaccurately reported revenues and expenditure, stringent and bureaucratic government policies, high rate of instances of human error and poor judgment, external causes of insecurity, and irregular time schedules are risk factors associated with the Alliance Data Systems Company.

Unauthorized use of clients’ data, misuse of system controls, inappropriate access to accounting transactions, and cyber crimes are other major challenges that are likely to be encountered by the Alliance Data Systems Company. Alliance Data Systems Company invests a lot of resources in ensuring that efficiency and cost-effectiveness are realized in its endeavor to reach out to its clients. Sadly, this has the risk factor associated with time wastage, software piracy, infringement on a product’s patent rights and copyright issues, bureaucracy, and poor allocation of resources. The company has been economically beneficial to society through its corporate social responsibility and its pricing strategy of offering very quality and cost effective goods and services to the market.

AMR Corporation

AMR Corporation is an airline company with an internal appeal to clients. Manipulation of financial reports, inappropriately reported revenues and expenditures, charging of personal services rendered to clients by airline staff, inaccurate coding of bills, airline fraud through credit cards and fraudulent online payments are risk factors that interfere with the operations of AMR Corporation. Fraud risk factors such as corruption and misappropriation of resources are major challenges to the business operations of AMR Corporation. The use of external and internal auditors, the need to comply with various ethical standards and the existence of non-financial operations are other major risk factors facing AMR Corporation, an airline company. Engagement in wrong mergers and business partnerships that have not been tested remain to be risk factors that can negatively impact on the performance of the AMR Corporation. In-depth business environmental analysis and proper strategic business performance are crucial in enabling AMR Corporation to deal with its risk factors.

The SAS 99 risk consideration tool approach and risk assessment can be used in enhancing the level of efficiency and cost effectiveness in the management of business operations. Many other aspects of risk management can hamper the operations of the organization though they have not been identified by the AMR Corporation. Various airline fraud scenarios can occur and thus negatively affect the operations of the airline company. Other risk factors related to the company include existence of ineffective security monitoring strategies, poor planning of accrued revenue and ineffective money and risk management strategies. Such risk factors could however be of significance if they are identified in a timely manner and then used to streamline the operations of the company. Fraudulent cases and the likelihood of terrorism attacks occurring could be beneficial in that they could trigger positive collaboration among key airline stakeholders. Poor air traffic conditions and a sudden fall in public demand for the airline services could pose a major challenge to the corporation.

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Embezzlement and misappropriation of funds and the likelihood of flawed competitive strategies are likely challenges to the operations of the organization. The mentioned challenges could lead to high operational costs for the organization. The best control mechanisms for the AMR Corporation risk factors include constant innovation and creativity in determining the business strategies, undertaking regular research on issues pertaining to market trends and boosting employees’ morale.

Baker Hughes

Reliance on business forecasting and addressing customers’ needs and demands based on estimates and projects are common business practices undertaken by Baker Hughes. Misappropriation of assets, inaccurate reporting of revenues and expenditures, misuse of customer data, inaccurate recording of receipts and fraud by employees are major risk factors facing Baker Hughes. Fictitious invoices presented by clients, inflated demand and price volatility of oil and gas, geopolitical and terrorism risks, inaccurate recording of receipts by accounts officers, irregular payroll adjustments, embezzlement of financial resources, a sudden change in government policies and regulatory conditions and a possible change in price market share highly underlie major risk factors that relate to the company. The automation of operations of Baker Hughes can be crucial in enhancing its success. Unfortunately, its major fraud risk factor is the possible loss of finances through fraudulent transactions which can lead to sale of its major assets. Proper financial reporting mechanisms should be adopted with a view of providing cost effective, reliable and practical solutions to customers with the aim of improving productivity. Creation of value to clients from unconventional reservoirs is a risky practice. If not addressed, such an engagement could encourage unscrupulous business deals, fraud, costly business operations, over use of unconventional hydrocarbons and regular complications in the process of managing water in the oilfields. Visionary, mission oriented, cost effective and consultative leadership are vital control strategies that could be used to reliably deal with the aforementioned risk factors.

Microsoft Corporation

Microsoft Corporation is an internationally recognized information technology organization that offers both hardware and software technological solutions. The IT products of Microsoft Corporation are very sensitive and deserve the implementation of very stringent security standards. As risk factors, the dynamics of the products offered present security challenges that are unmatched in the industry. Other risk factors for Microsoft Corporation include existence of hackers, spywares, human error in the system design process, unfair competition, fraud by employees, piracy, malwares, interference with other people’s applications, high cost of maintaining the set security standards and other security concerns related to patent rights and copyright laws. Poor communication infrastructure in some countries is another major risk factor for the Microsoft Corporation. Microsoft Corporation has continued to lose a lot of money through fraudulent financial activities. Fraudsters often fabricate illegal money transfer mechanisms through which a lot of money laundering is done.


Different risk factors affect different organizations in diverse ways. For efficiency, continuity and cost effectiveness of organizational processes, it is apparent from the above fraud risk factor assessment that proper planning, in-depth situational analysis and constant evaluation of business processes are of essence to the success of business organizations.

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