Fraud and corruption are just two of the many threats to financial security and economic growth. Efforts to curb their effects have evolved the need for regulatory compliance. Below, we’ll take a closer look at the rise and need for effective risk management and regulatory compliance in a changing South African economy. 

Read more: Debit order fraud prevention.

A look at fraud and corruption in South Africa 

With a tightening stranglehold on South Africa, fraud and corruption are more entrenched in our daily lives than ever before. This, unfortunately, isn’t a shocking statement anymore.  You don’t have to look hard to find examples of governmental and private sector failures to foresee, address, and resolve high-level fraud and corruption cases.  

Looking back, South Africa first became acquainted with the terrible duo in 1996, courtesy of the Sarafina 2 debacle. Little did we know that one simple payment to playwright Mbongeni Ngema all those years ago would be the first of more than 30 major fraud and corruption scandals. Since then, many headlines have revealed almost unbelievable findings. Recent memories bring up thoughts of the R515-million PPE contract awarded to Red Roses Africa by the South African Police Service in 2021.  

The list, sadly, goes on. 

South Africa’s greylisting and what it means for businesses 

As a result of continued rampant corruption, South Africa dipped to below average, losing two more points in the 2023 Corruption Perceptions Index (CPI) curated by Transparency International. This is on par with Burkina Faso, Vietnam, and Kosovo. In addition to this lowered ranking, the South African economy suffered another blow in 2023. Global crime watchdog, the Financial Action Task Force (FATF), officially greylisted the country for non-compliance with international standards. These standards all address the prevention of money laundering, terrorist financing, and proliferation. The FATF concluded that the current legal framework in South Africa could not address the scope of risks within its mandate. Contextually, this is only the third time a G20 country has been placed on this list. The various remedial actions taken to date highlights the importance of more stringent compliance needs and regulations across all sectors.  

South Africa’s greylisting, however, is far more telling of problems faced by local businesses due to a changing landscape rife with fraud and corruption. Highlighting how crucial it is to minimise risk; businesses simply cannot afford to engage with companies unaligned with in-house risk mitigation and compliance requirements.  It does remain continuously difficult to look to governmental departments and policies in this regard. However, when looking for a balance between idealised policies and regulatory requirements, local businesses have to work with what they’re given, which isn’t always much. Taking things further, local businesses are expected to operate within this ecosystem. However, no one can deny a simple truth—the core of mutually beneficial financial growth rests on trust. The need for trust and the prevalence of corruption creates quite a paradox. 

 Because of this trust, transparent compliance is expected and non-negotiable in the current climate. When businesses commit to this foundational aspect of finance, both upstream and downstream channels reap the benefit.  

Getting a grip on compliance and risk 

Regulatory compliance can seem intimidating and, at the best of times, potentially confusing from a distance. This is in part because different industries have different regulations. Although intricate, these distinct regulatory policies and requirements are specific to their industries and in place to ensure adherence to applicable laws, rules, codes, and standards. Aimed at streamlining the cultivation of a compliance framework, businesses must functionally operate within their industry scope. 

That said, there are instances where regulatory compliance affects all industries or form part of general legislation. Various examples exist, with some prominent South African pieces of legislation being the Financial Intelligence Centre Act (FICA), the Income Tax Act, the Occupational Health and Safety Act and the Protection of Personal Information Act (POPIA). 

These regulatory requirements, and many others, must be adhered to, as regulators value compliance status highly. 

How to improve regulatory compliance and risk management 

What can local businesses do to ensure compliance while reducing risk when all is said and done?  

• An easy first step is to consider regulators for a minute. From their side, the goal is smooth unilateral compliance, which results in easily accessible information and guidance on their respective websites. 

• Businesses can invest in client and supplier screening. This can include automated screenings for sanctions, employees, suppliers, and client databases. In addition, risk screening of clients is also a valuable asset. Remember that this is a paid service, and while potentially expensive for smaller businesses, the benefit of effective risk aversion is near-priceless. 

• Partner with a trusted financial services provider, like Netcash, to handle payments. Our payment management solutions include risk reports, bank account verification, business linked to consumers, consumer credit checks, CIPC business reports, and mini company reports. 

• At the ground level, businesses that attend to and prioritise staff education naturally ease their way to compliance. This involves training to ensure staff are aware of legislative requirements and changes and enable them to catch potential fraudulent activity.  

Sidenote: Ensure that employees can distinguish between the beneficial ownership and the directors of your business. 

• An alternative is to receive free government gazettes, which makes it easy to stay updated with industry changes. Additionally, the Green Gazette send out monthly alerts about changes and can also be searched for any other gazetted notices for R129 a month. 

The bottom line | Regulatory compliance and risk management with Netcash 

In theory, compliance with industry regulations is a learned skill, and practical application can be daunting. Businesses that partner with Netcash can rely on the highest levels of compliance. Netcash adheres to the same stringent regulations placed on banks and, as such, requires optimal compliance from clients. 

Our duty is to keep clients up to date with changes in the regulatory space and to inform them about potential risks. Netcash also provides advice on how to spot fraud and corruption and ways to address it. 

Mark Zuckerberg once said that “the biggest risk is not taking any risk.” As a business owner, you probably know this all too well. Daily, you face the daunting challenge of building your company to new heights. And while you play a pivotal role in creating jobs and driving the economy, you might find navigating the business landscape tricky.   

Let’s be honest: businesses face different risks, and yours is not exempt. That’s where proper risk management comes in.  

From high crime rates to infrastructure blackouts, South African businesses face many threats. Using risk reports as part of your overall risk management plan can help you identify and respond to such challenges.  

So, are you ready to empower yourself as a business owner to defend your entity and help it thrive? It’s time to find out how risk reports can help your company traverse rocky terrain. 

What are risk reports? 

Risk reports are documents that identify and describe the risks faced by a business. Netcash offers the following risk reports: bank account verification, mini company report, business linked to the consumer, CIPC business, and consumer credit check. These reports also help your company make informed decisions when dealing with customers and creditors.  

These possible threats can affect your business in many ways, be it through your operations, finances, and overall long-term stability. That said, you wouldn’t be faulted for thinking that risk reports are compiled for large organisations only. The thing is, even small and medium enterprises (SMEs) can benefit from using them.  

With increasing economic pressure, global health crises, and cybersecurity threats, to name a few, all businesses are confronted with threats to their long-term viability. 

Risks faced by South African businesses 

Running a business is tough. And as exciting and promising as the South African business landscape is, you’re probably aware of the following risks faced by entrepreneurs such as yourself.  

Here are some common risks your enterprise may face. 

Employee fraud 

Ask any business owner, and they’ll tell you that finding competent workers with integrity is quite the feat. Not only do you want people who know what they’re doing, you want them to behave well when no one’s watching. Sadly, a survey by The Global Economic Crime and Fraud found that employees were responsible for 41% of economic crimes in South Africa.  

Thankfully, you needn’t worry. Netcash’s risk reports can help you avoid internal fraud. These will help you check the credit status of potential employees whose key role will be to manage money. Prime examples include financial managers and credit control staff.  

Below are a few examples of employee fraud: 

• Falsified timesheets: In companies where tracking billable hours is essential, some workers may falsify their hours worked by inputting earlier times than they’ve arrived and later ones when they leave the office. 

• Ghost employees: This usually occurs when a member of the payroll function creates a fake employee and inputs their own banking details to receive payment. 

Why your business needs to compile risk reports 

In a business environment characterised by volatility, uncertainty, complexity, and ambiguity (VUCA), risk reports can help your organisation safeguard its interests. On top of helping you navigate the business environment, risk assessment reports can help your business thrive.  

Business reports to help avoid hazards and risks 

Here are the types of reports Netcash offers that can help you navigate today’s business landscape. You can rely on the accuracy of the information contained therein. Netcash pulls these reports from various reputable sources like the CIPC and multiple credit bureaus, including Transunion, Experian, XDS, and Compuscan. 

Bank account verification 

With Netcash, you can verify the bank account of the person or business you’re transacting with. This gives you peace of mind that you’re transacting with whom you intend to. 

 

Running Netcash’s Account Verification Service (AVS) will return the following information to you: 

• Branch code 

• Account number 

• ID number or company registration number 

• Whether or not the account exists 

• If the account was opened more than 3 months ago 

• And more 

Bank account verification helps you reduce your risk of fraud and paying money into the wrong account. 

Business linked to consumer 

This report gives you the lowdown on potential relationships a consumer might have with a business. If you’d like to do your due diligence and identify if a consumer is linked to a particular entity, Netcash can assist you.  

Your business can benefit from discovering if a prospective customer has any pre-existing relationships that pose a risk to you.

 

Consumer credit check 

With Netcash’s consumer credit check report you’ll get all the information you need about your customer’s credit history.   

You’ll have the following information at your fingertips: 

• Payment history 

• Outstanding debts or defaults 

• The type of credit accounts opened 

• Account terms and conditions 

Armed with this knowledge helps you assess your potential customers’s ability to repay loans and reduce your risk of bad debts. 

 

Note: Remember to get consent before you run a credit check against a potential customer. This is because consumer credit information is confidential and needs to be protected. Furthermore, the National Credit Act (NCA) prescribes that you obtain consent.

 

CIPC business check 

Need to verify the owner of a business? Netcash’s CIPC business report can give you information about a company, including:  

• Its company name and registration number 

• Business activities of the company 

• Company financial statements 

• Registered office address of the company 

• The directors and shareholders of the company 

While South Africa has a relatively stable political environment, businesses are exposed to risks such as crime and corruption, as mentioned earlier. Thankfully, a CIPC business can come in handy. It can help your business assess the credibility of potential partners, suppliers, and customers, allowing you to transact with legitimate businesses that are governed well.

 

Mini company report 

Similar to the CIPC business report, a mini company report provides you with information about a company. But it gives you different information. A mini company report gives you a quick breakdown of the business activities of a company. It also contains information on the financial performance of an entity.  

This kind of information can also help you do your due diligence on a prospective supplier. 

Components of a risk assessment report 

Knowing the importance and benefits of risk reporting is great. But what do they look like, and what do they entail? Fear not. Below, you’ll find a simple outline of what to expect in a risk assessment report.  

Tip: When preparing your assessment, it’s important to consider who your audience is. If you’re preparing it for decision-making, ensure you include all information necessary for management to make informed decisions on behalf of your company. 

1. An executive summary: This is a brief overview of the report’s key findings. It’ll also highlight major risks faced by your business and the actions you can take to mitigate these risks. 
2. The methodology used: Here, the write-up focuses on the processes and methods your business will follow when performing risk assessments. This could entail how you plan to collect data, analyse risks, and the criteria used for evaluating said dangers. 
3. Your business’s risk profile: This part of the risk report helps quantify threats using numerical values to make understanding their ramifications much easier. Risk profiles can be based on the probability of risks taking place and how serious they are. 
4. The risks faced by your business: This section identifies and describes risks that can impact your organisation.  
5. Analysis of risks: Analysing risks entails assessing their likelihood of occurring and their potential impacts.  
6. An evaluation of risks: Once your organisation’s risks have been identified and analysed, they’re then ranked in order of significance. This doesn’t necessarily mean some risks are unimportant, whilst others are. But it does mean they’re ranked based on several factors. These include how severe they are, how often they occur, whether they prevent you from reaching organisational goals, and so on. 
7. Recommended strategies: Now, you focus on how to minimise or eliminate these issues.  
8. Plan of action: This section focuses on how you’ll implement the recommended strategies. You’re looking at what specific tasks to carry out, who is responsible for certain tasks, when to complete them, and the resources you’ll require. 
9. Monitoring and reporting: Here, the risk report focuses on monitoring your risk mitigation efforts and the progress thereof. You can also include key performance indicators (KPIs) that’ll help you with tracking. 
10. Communication of risk: This part of the report focuses on how you’ll communicate risk-related information to relevant stakeholders within and outside your company. 

Note: Risk reports may look different from one organisation to the next. You can use the outline above while adapting it to your business’s needs. 

Final thoughts on risk reporting for businesses 

It’s clear now, more than ever, that businesses face risks that can threaten their survival and growth. Whether you’re concerned about a particular economic risk or want to get ahead of regulatory changes, a risk report is essential in your threat management toolkit.  

After reading this, you’ll know how these documents can give valuable risk insights. Be it in the identification, assessment, or management of threats, these reports will guide you in making better decisions for your business.