By Rick Burke, Head of Corporate Products and Services, TD Bank
Growing companies go through many transitions: adding additional staff, expanding their customer base and engaging new suppliers. This growth translates into a need to formalize organizational financial processes, including the treasury function. Prior to evolving into a true middle market company, many organizations operate with the CEO acting as CFO, possibly supported by a bookkeeper and accountant. But as deposits grow and the dollar amounts flowing into and out of the company increase, financial professionals are needed for balance sheet management, payment processing and to provide strategic insight.
While the business growth phase is fast-paced and exciting, innovation and expansion should not overshadow the need for effective risk management. Put simply, adding employees and customers to your roster and engaging in new vendor relationships creates added complexity and exposes an organization to additional risk for breaches, information leaks and fraud – topics that are top-of-mind for most companies. In a TD Bank survey of treasury and financial professionals at the 2018 Association for Financial Professionals Conference, 44 percent of respondents identified risk of payments fraud and cyber security threats as their greatest challenge for 2019. This concern isn't without reason: 74 percent of companies in the 2017 Association of Financial Professionals Payments and Fraud Control Survey reported they were victims of payments fraud.
These threats are unlikely to go away soon. Another recent TD Bank survey further found that 84 percent of financial professionals believe these types of incidents will become a bigger threat over the next few years – a daunting prospect to a business in the midst of operationalizing a treasury management function. Along with the potential for breaches, the costs of cyberattacks and payments fraud can range from hundreds to hundreds of thousands of dollars in losses. Check fraud losses, for instance, average $1,000-$2,000, according to American Banking Association numbers, while the FBI reports wire fraud losses average over $130,000. These amounts do not include the indirect costs to a company, such as investing in risk management solutions, reimbursing affected parties and potentially losing revenue due to reputational damage.
Combating these risks means that companies need to step up their defenses. While there is no one, guaranteed solution, every participant in the business financial ecosystem – financial institutions, third-party payment processors and companies – must do their part to help prevent and minimize cyberattacks and payments fraud.
While many businesses already have some amount of risk processes in place, a smart organization will look for opportunities to invest in and operationalize their fight against cyber criminals. Among the suggested methods to reduce fraud and cyber risks: