From Compliance to Culture: How Financial Discipline Mitigates Fraud Risks in Modern Business

Last month I worked on a media article which focused on the role that CFOs could play in strengthening financial controls in the public sector.

The gist of it was that CFOs play a crucial role in establishing a strong culture of financial discipline, particularly in sectors where accountability is essential but often challenging to enforce. The key takeaway? Financial controls alone aren’t enough. Even with every control in place, without a culture that supports accountability, the best safeguards can still fall short.

In brainstorming our upcoming media article, I wanted to touch on why we talk about “Financial Disciplines” as opposed to “Financial Controls”. In today’s landscape, fraud tactics are evolving faster than ever. In fact, PwC’s 2024 Global Economic Crime and Fraud Survey found that economic crime remains pervasive, with procurement fraud among the top economic crimes reported globally. According to the 2023 LexisNexis® True Cost of Fraud™ Study – Europe, Middle East and Africa, 49% of South African companies reported an increase in fraud in the 12 months before the survey, while organisations incur an average cost of R3.64 (R3.10 for retailers and R4.52 for financial institutions) for every rand lost to fraud.

Furthermore, the latest data from TransUnion shows that nearly 5% of digital transactions originating in South Africa were suspected of fraud in the first half of 2024. Notably, six in 10 South African consumers reported being targeted by fraud attempts, underscoring the need for vigilant practices.

The difference between “controls” and “disciplines” lies in the mindset of the user. Traditional controls are essential, yes, but they’re often reactive. Disciplines, on the other hand, build a proactive culture. A disciplined culture empowers employees and partners to question things that don’t seem right. One of the most common types of fraud in the market is where a third party will attempt to imitate an existing supplier and submit a fraudulent invoice with fake bank account details. Alternatively, you might see sophisticated impersonations of senior executives instructing a finance team to make urgent payments to suppliers.

Imagine a staff member receiving a WhatsApp message from someone claiming to be the CFO, urgently asking for payment to a new supplier. In an organisation with a disciplined approach, they’d feel confident pausing and verifying this. They’d instinctively confirm with the finance department rather than proceeding without question.

Embedding financial discipline means creating an environment where people are encouraged to double-check anything that seems out of the ordinary. It’s not just about controls; it’s about building trust within the organisation. When everyone feels confident in reaching out to finance with questions, it reduces the risk of costly errors and ensures the business is protected against increasingly sophisticated fraud schemes.

This proactive culture doesn’t just reduce fraud risk; it also strengthens relationships with external partners. When clients, suppliers, and other stakeholders see your organisation as one where financial discipline is deeply embedded, they know what to expect. They see a business with high standards of integrity, which translates into more trustworthy interactions and a stronger reputation overall.

Beyond protecting the business, building this disciplined environment means creating a resilient ecosystem where people, systems, and processes work in harmony to ensure security and stability. It’s about establishing a culture where everyone, from suppliers to senior management, understands and aligns with the company’s financial values and expectations. From regular training on fraud detection to clear protocols for unusual requests, every element should support this framework of vigilance and accountability.

For CFOs, fostering financial discipline is more than just ticking compliance boxes. It’s about setting a standard that protects the business in a way that promotes long-term growth and success. With fraud threats evolving constantly, having a proactive, resilient culture isn’t just a nice-to-have; it’s essential.

As we look forward, let’s set high standards for financial resilience, building business cultures that do more than survive but inspire confidence and integrity in every transaction. By embedding financial discipline across people, systems, and processes, we lay the foundation for organisations that thrive.