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Blog How To Lose 40m Euros By Being Too Trusting Of Your Emails


How To Lose 40m Euros By Being Too Trusting Of Your Emails

Imagine being the employee at German manufacturing giant, Leoni AG who recently fell prey to online scammers and approved the payment of bogus invoices totalling 40 million Euros.

The scam, which came to light in the past few weeks, involved cyber criminals sending official-looking payment requests via email to a Leoni satellite in Romania. Leoni is the world’s fourth largest manufacturer of wires and electrical cables and owns four factories in Romania.

The emails were received and handled by the unfortunate employee. Since they appeared to be emails from one of Leoni’s top executives in Germany and it was normal practice to pay even large invoices in this way, suspicions weren’t aroused. The fake invoices were subsequently paid to a bank in the Czech Republic. Bye bye 40 million Euros!

Of course, Leoni is far from alone in falling prey to email scams like this: earlier this year, toy making giant Mattel lost almost $US 3 million in a phishing campaign.

So how safe is your company from cyber criminals? Or even from your own employees?

If you have formal internal controls in place your company might be relatively secure from internal and external theft. But without such internal controls, designed to help your company achieves its goals and limit the internal and external risks and threats you’re likely to encounter, your company is a lovely soft target for the criminally-minded or for those who have something to hide.

People like the employee of French banking group Societe Generale (SocGen) who used his in-depth knowledge of the bank’s fraud control systems to circumvent checking procedures so he could hide trading losses of $US 7 billion.

He built up large positions and made unauthorised bets on stock index futures, and as his losses mounted, covered his tracks by using his knowledge of the bank’s technology systems.

Of course, internal controls do more than minimise the risk of fraud. They also help your company to:

  • Reach your performance and profitability targets
  • Prevent the loss of assets
  • Ensure financial reporting is accurate and reliable
  • Achieve compliancy with regulations and laws.

Without formal internal controls, you and your fellow Directors will never know if the information about your business is accurate, reliable, or up-to-date. Worse, a lack of internal control systems means you’re putting your company’s future in peril.

The essential elements of an internal control system

There are five key elements in a good internal control system:

  1. Separation of duties
  2. Authorisation
  3. Documentation
  4. Supervision
  5. Reconciliation

If you’d like to find out more about internal systems, you can download a free report by clicking here.

Remember, without both preventative and detective internal controls, your company is extremely vulnerable.

The benefits of having strong internal systems are obvious: putting the right systems in place allows you to see the business from a much clearer vantage point. Decisions to grow the business can be made in the knowledge that the underlying model is scalable and robust.

But it’s not enough to create internal controls: they need to be regularly reviewed to ensure they are keeping pace with the company’s growth. Pressure to create, develop and innovate means that old systems can quickly become redundant and need rethinking and rebuilding. This is really one of the biggest headaches a business owner faces.

If you’re like many business owners, it can be difficult to know where to start or to assess whether the controls you do have are as effective and as efficient as they should be. You need the help of someone with the experience and expertise to carry out such work. In other words, you need a Finance Director (FD) or CFO.

But as an SME, you probably don’t have the resources or the need to employ a full-time FD. So what can you do? You can try to manage the entire process on your own. Or, you can make it easy on yourself by hiring a part-time FD to manage the entire process for you.

The part-time FD or CFO will help you to create the necessary controls framework in your business. Meanwhile, you can get on with what you do best. You can watch a 3-minute video here which explains the part-time FD/CFO model.

The FD Centre will provide you with a world-class FD or CFO with ‘big business experience’ for a fraction of the cost of a full-time FD. It’s the business equivalent of having an Olympic coach to help your business thrive.

To get started, just book your free one-to-one call with one of our internal control specialists—just click here now.



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