Potential Risk Monitor

Challenges faced by Japanese companies

Many Japanese companies are facing growing challenges related to detecting and preventing fraud risks in their businesses. According to the Japanese version of the 2020 Global Economic Crime Survey (GECS), 21% of Japanese companies experienced fraud-related issues in the past two years, of which 22% spent more than one million US dollars in total to manage the situation.

Many Japanese companies reported that they do not perform fraud risk assessments (28%) or do so only informally or in a limited manner (27%). Only 13% of companies, both in Japan and globally, claim to manage risks by making full use of technology.

The long-lasting COVID-19 pandemic and the accompanying travel restrictions have particularly contributed to a lack of transparency in business processes. Traditional internal control methods, such as stock-taking and supporting document reviews can be difficult to carry out under the restrictions of remote work.

While companies are relying more on data to manage their increasing business risks in these situations, few have established corporate governance and internal controls to address the following issues under this ‘new normal’:

  1. Remote working arrangements make the physical verification of supporting documents difficult.
  2. Physical stock-taking, especially for overseas warehouses, can be difficult or even impossible.
  3. Routine authorization processes requiring seals of approval need to be switched to digital approval processes.
  4. Lack of face-to-face communication contributes to the insufficient transparency of subsidiary operations.
  5. Companies are having to rely on digital data now more than ever to run their businesses.

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the Japanese version of the 2020 Global Economic Crime Survey (GECS)

Potential Risk Monitor

Potential Risk Monitor, a PwC product, is a fraud detection and monitoring solution that helps our clients address fraud risks under this unprecedented ‘new normal’.

Potential Risk Monitor is a standardised data analytics package developed by the PwC Japan Group’s forensics team. It covers sales, procurement and expense business processes—processes which represent particularly high risks of fraud. Potential Risk Monitor contains multiple testing scenarios for performing risk-based data analysis from different perspectives, which effectively target specific potential risk areas including accounting fraud and bribery. This package is provided as a set of interactive dashboards which can be introduced and used easily and conveniently, helping you to monitor your main business process activities in an effective and timely manner, both locally and remotely.

Risk coverage

The Potential Risk Monitor package covers major risks in procurement, sales, and expense-related business processes, including risks of accounting fraud and bribery. As the types of fraud continue to evolve, Potential Risk Monitor can help you detect potential fraud at an early stage. Its testing scenarios provide holistic views as well as analytical perspectives, including data profiling analysis which presents a full picture of business processes and trends, as well as statistical analysis and testing modules to identify high-risk transactions.

Risk coverage

Features of Potential Risk Monitor

  • Flexibility: The analysis scenarios can be customised.
  • Cost effectiveness: The standard package can be deployed as-is to keep costs low, and future updates can also be performed in a highly cost effective manner.
  • Professional forensic knowledge: The fraud risk monitoring scenarios have been designed by PwC’s forensic professionals based on the knowledge and experience we have accumulated in the forensic field.
  • Fraud prevention: By identifying fraud risks in your business processes, you can prevent fraud incidents—and related damages—before they occur.
  • Risk monitoring: A reusable dashboard makes it possible for you to monitor your domestic and overseas subsidiaries and production bases (plants and factories), or to conduct pre-acquisition due diligence by using the accounting data of the target company.

Workflow and roadmap for implementing Potential Risk Monitor

The implementation of Potential Risk Monitor takes place in three phases, from introduction to continuous monitoring.

In phase 1, we implement the standard Potential Risk Monitor package to help you monitor fraud risks quickly and at a low cost.

In phase 2, based on your feedback, we improve the testing scenarios and customise additional testing scenarios based on your needs. At the same time, we can also provide forensic investigation services and compliance advisory services to help you enhance your internal control and compliance programs.

Finally, in phase 3, we implement automation and a continuous monitoring environment to automate the Potential Risk Monitor package.

Our team

Yuichi Ikeda

Partner, PwC Advisory LLC

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Min Liu

Director, PwC Advisory LLC

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