The fraud triangle is a model used to explain the factors that contribute to fraudulent behaviour. The three elements of the fraud triangle are opportunity, rationalisation, and pressure.
Rationalisation is the process by which individuals justify or rationalise their fraudulent behaviour to themselves. This could involve creating a false narrative or explanation for their actions, or convincing themselves that their actions are not truly fraudulent. Examples of rationalisation could include believing that the fraud will ultimately benefit the company or that they are simply borrowing the money and will pay it back.
Rationalisation is an important element of the fraud triangle because it allows individuals to justify their fraudulent behaviour to themselves and continue engaging in that behaviour. To prevent fraud, it is important to address the underlying rationalisations that individuals may use to justify their behaviour. This can include providing training on ethics and fraud prevention, establishing clear codes of conduct and policies, and promoting a culture of honesty and transparency within the organisation.
By addressing the rationalisations that individuals may use to justify fraudulent behaviour, organisations can reduce the risk of fraudulent behaviour and protect themselves from financial loss and reputational damage.