COVID-19 – A backdoor to increased fraud risk

COVID-19 – A backdoor to increased fraud risk?

The year 2020 has opened the door for the virus, along with a wider door for fraud risk, to enter. It used to be less than it is now. Globally, the whole nation was under lockdown because of the pandemic, and people were not permitted to leave their houses. Thus, everything had to shift to online mode, from taking classes online to buying groceries and poultry.

Due to COVID-19 Some businesses even closed down, while others went online and individuals began working from home. 


The fraud risk has grown in the manner listed below.


Easy hacking

Hacking is such a big issue nowadays that companies are merely things because even critical national documents are being accessed, so companies are just mere things. Since the pandemic, everything has grown simpler since going online. Hackers can now easily access corporate data and steal it. What made them do it? It’s because they would sell the information to rival businesses in order for them to profit from it or build their business by using their tools and methods. 

Passwords should be changed frequently to protect and Fraud Investigation may be difficult to crack in order to protect your business from a hack. The most crucial information should also be kept private and should not be accessible to any employee.


Developing fake websites

Developing fake websites

There are already a lot of bogus websites being created every day to trick people. Due to the pandemic, everyone was dependent on the internet. People began utilizing the online service for shopping and other needs, which has grown. The customer may be confused after the transaction as to why their product or service has not arrived despite their purchase, at which point they will know they have been defrauded.

Therefore, it is crucial to locate the official website or application to use in order to save oneself from fraudsters. If they are ever the victims of any cyber fraud, it is now their duty to notify the police of the cybercrime so that it can be stopped and blocked. 


Fraud in online payments

Fraud in online payments

 As soon as the fraudster discovered that customers had begun using the website and application to make purchases, the scam began to happen via links and messages. More information was shared through social media during COVID-19 to inform others about the news and facts. For instance, when people were in need of oxygen, many people began to post their contact information and links to apply for oxygen, but not every link was accurate. So what takes place in this scenario? When someone clicks the link, they are taken to the application and transaction where they fill out all the information. Then information like the pin is saved and used by the fraudster to steal money from the person as this a big fraud risk?.

It is crucial to never click on any links shared by anyone since they may be used to track down or steal passwords or other personal information. Additionally, if one person stops forwarding, it may be feasible for the others to avoid falling into the trap, so it is crucial to be very careful when doing so.


Fraud using the shared pictures 

Employees and the founder's reputation

Almost everyone began working from home. If they worked in an office, the person would not be able to share any work-related information with their family, friends, or anybody else, but working from home has given them the flexibility to access anything they used to do in the office. People occasionally post pictures that fraudsters can use or even employees who can steal money or divulge company secrets to anyone.

Employees should refrain from sharing images of their work while they are at work since they could unintentionally reveal confidential information. Therefore, it is crucial to constantly exercise caution when sharing.

Catching a Covid 19 can be harmful, but what is more harmful is being a victim of fraud. The above are just a few ways a fraudster might try to trick you. Even seemingly insignificant things might cost you money or damage the company’s reputation investigation. Cross-checking is crucial while doing anything, and you shouldn’t give chance for the fraudster to scam you.


kind of due diligence does VC

What kind of due diligence does VC do before investing?

Venture Capital, or VCs, provides funding to start-up businesses with the potential to succeed in the future. But they conduct their own research to ensure they invest their money in the right companies.

They assess it by considering the company’s objectives, its current state, its liabilities, and its revenue. The essence is to protect VCs from every risk resulting in investment failure and to determine whether the company’s foundation is strong enough to grow and flourish. The following is a list of the various types of due diligence carried out by venture capitalists before investing in a startup:


Financial check

Financial check

The basic goal of conducting financial due diligence is to find out whether the company’s financial reporting is true and correct. Due to the fact that no one would want to collaborate with a business that has a poor track record and reputation, credibility eventually degrades. It would include information about loans and other debt that is now owed, the sales margin analysis, the primary expenditures of the company, what they will be in a few years, and what the worst-case scenario is. Will there be any alternative ways to recoup costs if things don’t go as planned? 


Take a look at the “founders”

The first and most important step in investing in a business is to research the founder’s background.  If possible, they would even speak with a prospective employee to determine the qualifications and experience of that particular person. As both will be collaborating till the company’s liquidation or the chance of one person leaving. So, in that case, the other person would want to invest and would expect that they’d be eager, excited as well as someone whom they wouldn’t hesitate to turn to in difficult times.


Innovation today and beyond

Innovation today and beyond

They would research the company’s goods and services before making an investment. Additionally, companies would observe how consumers perceive the brand, how much the current market value is, and what the company would have to offer in the coming months or years. In order to determine whether an investment in that firm would indeed be successful, the VC would ask for a blueprint while taking future advancements into consideration.


Competitor analysis 

Due diligence is  Simply gathering information about the firm the VCs plan to invest in and looking at competitors might provide additional insight into the company’s current and future. For instance, it might reveal who the company’s competitors are and whether they will be at a disadvantage, or it might simply highlight any weaknesses the company may have.


Clients of the company

kind of due diligence

Customer due diligence, which is essentially about checking and validating the commercial element of the firm, is crucial when investing in a company. This would include whether the client’s needs are met by the company’s product or service, the quality of the client-company relationship, and the degree of client-company responsiveness. 

The business would utilize a SWOT analysis, which identifies strengths, weaknesses, opportunities, and threats, to examine if it can balance a variety of aspects, boost revenue, and outperform rival businesses. so that it can outperform the other company.


Intellectual property

Intellectual property

Intellectual property includes trademarks, trade secrets, copyrights, and patents. When a firm owns the intellectual property, it has the ownership along with the legal rights to prevent others from stealing its ideas and innovations. However, without intellectual property, it is unable to own its creations and there is a greater risk that others will do so. The primary factors that the VCs consider are ownership and whether or not they have addressed all legal risks; if not, they will eventually cancel the investment and cease funding the business.


Although doing your due diligence can be challenging for some, once completed, it will pay you in the long run as you won’t overlook anything that could cause you to lose revenue on your investments in the future.

list of due diligence investigation

What types of due diligence investigation should an angel investor do for a startup?

Although startups can vary greatly, one thing they all have similar is the requirement for finance. Angel investors are among the most common finance in the beginning phases. 

Are angel investors real humans or fictitious beings? The term “angel investors” relates to buyers who are willing to invest in young businesses in the expectation that they will grow, provide worth, and even make some sufficient return on their investment plus some additional gain. The fact that angel investors provide not only monetary assistance for the business but also all other types of strategic support for its growth is among the main factors that entrepreneurs use to decide which investors to use as their seed capital.

People invest money in the stock market, which is risky, but some also increase company risk and financial risk by one or two levels. You invest in it and patiently wait for a liquidity event to occur before taking money out. Therefore, due diligence investigation should be carried out before investing in a startup company. 


Here is a list of due diligence investigation do:


Financial due diligence investigation

Financial due diligence investigation

Any potential investor would want to be certain that your company is not bankrupt or suffering from any other issues which would deem it a poor investment. Because of that reason, the prior financial statements will be requested by every investor. to review the startup’s tax returns, balance sheet, statement of income, and list of clients transactions (including the clients’ names and the periods of the transactions) and other key financial documents that are ready to be sent over.


Employees and the founder’s reputation

Employees and the founder's reputation

For any investment, assessing the executive team is essential. Investors examine the owner’s academic credentials, professional experience, and challenges before making an investment. Investors can evaluate reputational risk by learning about the startup’s lifestyle, hobbies, interests, family business interests, and social ties. Prior experience, business functions (strengths and weaknesses), and entrepreneur succession should all be carefully considered. 

Angel investors typically fund teams rather than people. So they will probably like to learn much more about the business’s training of its employees. They would perform due diligence on the staff to ensure that the team has the skills required to carry out and produce substantial items. Before issuing a check, an investor would want to have a conversation with a few key employees to get their perspective on the firm.  Angel investors are looking for a crew with a variety of skills, including product design, sales, and client service.


Intellectual property due diligence investigation

Intellectual property due diligence investigation

IP due diligence is a requirement for organizations with a substantial technological focus. The IP due diligence process includes Evaluation of the company’s intangible resources, verification of the legality of IP rights, and risks associated with estimating their true potential value. It is crucial to demonstrate whether your company can genuinely sell the goods that were recommended. Consider whether you haven’t submitted a trademark application or registered a trademark. If so, it is important to go ahead and do that before engaging an angel investor to demonstrate your commitment to safeguarding your company’s intellectual property. 


Market value investigation

Market value investigation

Angel investors would conduct an in-depth market investigation of your business’s items or services. an angel investor is likely to delve thoroughly into inquiries about the market, such as the number of clients, who they use, the startup’s major competitors, and plenty more. They’ll want to ensure the company they’re investing in has a sizable share in the market to seize and a competitive edge.


Although investing in new businesses is an excellent way for companies to diversify their holdings and aid the success of entrepreneurs, it is not risk-free. Even if a corporation has confidence in cash flow estimates, what seems excellent on paper might not hold true in practice. Investors cannot afford to compromise on conducting their due diligence when looking at startup investments.