Thursday, February 29, 2024

Protecting Your Small Business From Fraud

March is Fraud Prevention Month in Canada. Our increasing reliance on digital platforms and cloud computing means small businesses and their data are more vulnerable to fraudsters than ever. Here’s how you can protect your B2B business from fraud and cybercriminals.

For all small business owners – whether their companies are business-to-business (B2B) or business-to-consumer focused – the days of pushing pencils, paper-based invoicing, and printing contracts have been consigned to the dustbin of history. And for a good reason: digitizing your business generates new ways of collaborating and serving customers, saving massive amounts of time and money.

But, of course, there’s a downside to running your business online: fraud and cyber-attacks. That’s the yin and yang in life and business.

Statistics from the Canadian Anti-Fraud Centre shows as of February 28, 2022, there have been more than 12,000 reports of fraud costing more than $75 million. That’s just two months into this year! In 2021, more than 106,000 Canadians reported falling victim to fraud, costing an estimated $380 million. Moreover, a second-quarter 2021 report from TransUnion Canada suggests the rate of digital fraud attempts against financial services companies spiked 218% compared to the fourth quarter in 2020. That puts the onus on all small businesses to up their digital security.

Our increasing reliance on digital platforms and cloud computing means small businesses and their data are more vulnerable to fraudsters than ever, highlighting the need for cyber liability protection.

March is Fraud Prevention Month in Canada. B2B small business owners already know that fraud is an omnipresent threat, but many may not know how to spot it or what steps they can take to help prevent it from affecting their businesses.

There may also be a misguided belief in some quarters that fraudsters only target midsized or larger companies, but that is not the case. Instead, small businesses are at a heightened risk of being hurt by fraud and more likely to suffer more significant financial losses because they are less likely to have access to resources and infrastructure to fight fraud the way a larger company might.

According to a 2021 cyber insurance claims report, the incidents reported for organizations with fewer than 250 employees increased 57% from the first half of 2020 to 2021. These small businesses are usually targeted by ransomware, and it’s growing in severity: the average ransom demand made to small businesses in the first half of 2021 was $1.2 million.

How Small Businesses Can Help Prevent Fraud

It’s tough to find the right balance between incoming revenue and necessary investments in your business’s infrastructure. If your existing operation budget can’t support increasing your cybersecurity and anti-fraud protection, here are ways to mitigate the chances of becoming one of the many companies every year in Canada that fall victim to fraud:

• When hiring permanent or temporary employees, do thorough background checks and call references

• Train your staff to be cautious and skeptical of unsolicited calls, texts, and emails• Conduct surprise internal audits

• Create an anti-fraud policy and educate your staff• Clearly define procedures for verification, payment, and accounts

• Closely inspect all invoices before paying anything

• Watch out for anomalies, such as larger than average orders

• Make sure you protect your company with cyber liability insurance

• Use verification codes with credit cards or gift cards

• Keep up on the latest fraud trends and news

How Cyber Liability Insurance Can Protect Your Business From Fraud

Whether you purchase it as a standalone policy or add it to your business owner’s policy, cyber liability insurance provides small businesses with financial support if they suffer loss or damage from an accidental data breach, a cyber-attack, or fraud.

Any B2B business that operates online using cloud computing systems, business software solutions, social media networks and all other aspects of operating digitally needs this type of coverage. In brief, cyber liability protection includes coverage for legal costs and damages. It is designed to pay for repairs and restoration to your business software systems, provides funds for any losses you suffer during a system outage because of a cyber-attack, and credit monitoring services for your affected customers.

What to Do If Your Business Falls Victim to Fraud

If you suspect your business is a victim of fraud or receives threatening or abusive calls from collections agencies, gather all information about the suspected fraud. Save any emails, texts, or voicemails from fraudsters, and take screenshots of any applicable messages or webpages you receive. After that:

• Contact your local police and report what’s happening to the Canadian Anti-Fraud Centre toll-free at 1-888-495-8501 or online through the Royal Canadian Mounted Police’s Fraud Reporting System.

• Immediately contact your financial institutions, place flags on your accounts, change your passwords, and report the fraud to Canada’s two primary credit reporting bureaus, Equifax Canada and TransUnion of Canada.

• Contact your insurance broker and let them know of the fraud. If you need to file a cyber liability insurance claim, they can help guide you through the process.

Danish Yusuf is the CEO and co-founder of Zensurance; a Toronto-based technology startup focused on commercial insurance products and distribution. Danish is a former leader in McKinsey & Company’s Digital Insurance practice, supporting insurance clients globally in defining their digital strategy. Prior to McKinsey, Danish was a software architect and developer at IBM Canada. He earned a bachelor’s degree in Software Engineering from the University of Toronto and has an MBA from Harvard Business School.


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