What is meant by 'fraud risk'?

Fraud risk refers specifically to the potential for financial loss resulting from deceptive practices or fraudulent activities. Organizations and individuals face threats where deceit is used to gain an unfair advantage, typically involving some form of manipulation or misrepresentation. This could manifest in various forms, such as embezzlement, accounting fraud, identity theft, or Ponzi schemes.

Understanding fraud risk is crucial because it can lead to significant financial repercussions for businesses and undermine trust and integrity within the marketplace. Organizations implement controls, conduct audits, and establish policies to mitigate this risk, ensuring their operations are resilient against such deceptive acts.