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There's a lot you need to worry about as an entrepreneur. Can you hire the right team and get the equipment, materials, or data to execute your vision? Is it scalable? Is it even really that good of an idea in the first place? Your nascent business may be the victim of a supply shortage, bear market, or plain old fashioned bad luck, but the last thing you're probably worrying about is your startup being a victim of fraud.
Well, you might want to change that.
A new study by the Harvard Business Review shows that startups are uniquely susceptible to fraud. But why?
The HBR study simulated sales calls from associates to purchasers and sellers, and when participants were told that their counterpart was working for a startup, they tended to engage in more deception during the call. Two thirds of the faux buyers and almost three in four sellers opted to deceive who they believed to be a startup, compared to just half who thought they were dealing with a mature firm or were given no information about their counterparts.
So why would ersatz sales associates endeavor to take advantage of a startup?
HBR researchers recommend employees of startups make an extra effort to demonstrate expertise to partners and clients as well as build in contractual safeguards whenever possible to protect against fraud. "Startups rightly face increased scrutiny when negotiating with partners because of their perceived 'fake-it-till-you-make-it' ethos," the study noted, "especially in the light of several recent high-profile scandals."
But that doesn't mean your startup has to fall victim to fraud. For fraud prevention and response, an experienced business operation attorney is only a call or click away.
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