Managing financial risk and reducing fraud in agriculture
WHITE PAPER |
There are substantial risks involved in running an agriculture business, from trying to make money when one of your main partners is the sometimes-unpredictable Mother Nature, to preventing other companies or individuals from helping themselves to what you have worked so hard for. In every business, it is imperative to identify those assets and resources that are the most important, and then to design practices and processes to mitigate risk to them. People tend to do what is inspected instead of what is expected, meaning individuals typically will follow rules when they know guidelines are established and actively monitored; and that someone is ensuring those rules are followed. Understanding how people think and what motivates them can be a key driver in designing processes that will not only help you to become more profitable, but also help you keep what you make. Managing financial risk and reducing the risk of fraud do not have to be complicated.
Three relatively simple actions can significantly reduce your risk and exposure. First, align each employee's tasks with the desired outcomes. This sounds simple, but if you really look at how your team expends time and energy, then ensure that those activities match your goals (and that employees are rewarded for achieving your goals, and not their own), you will be amazed at the efficiency and success that can be attained. Second, implement a financial dashboard that can be easily monitored. You wouldn't think about driving a car without a dashboard displaying important data, so why would you try to run a business without critical data at your fingertips? Third, ensure adequate internal controls are in place. Effective internal controls do not have to be sophisticated or complicated to be effective. We'll explore these areas further in this white paper and look at ways you can counter fraud.
For more information, contact the author, Clay Worden, Partner, Agribusiness Industry Practice, RSM LLP.