According to the latest Global Fraud Report from Kroll, which features the Annual Global Fraud Survey conducted by the Economist Intelligence Unit, fraud concerns have increased sharply around the globe.
There are a lot of reasons to be concerned about workplace fraud – not to mention, it’s expensive! In tough economic times, many companies can’t afford to lose anymore money. The report claims that the average fraud costs companies 2.1% of earnings, which equates to a week’s worth of revenues a year. 18% of companies surveyed lost more than 4% of revenues to fraud, while 53 companies (1/4 of that group) lost more than 10% of revenues to fraud.
Here are the three “top level findings” from the Kroll Global Fraud report:
- Internal fraud is on the rise: This year’s study shows that 60% of all fraud cases are committed by insiders, up from 55% last year. Among companies that were impacted by fraud, junior employees were the most likely perpetrators at 28% followed by senior management at 21% and intermediaries or agents for the company at 11%. This means that this year, 60% of all frauds committed were by someone who worked for the company in some way.
- [isight-ad]Information theft, loss or attack continues to be a major threat to businesses worldwide: While the prevalence of information theft, loss or attack declined from 27% to 23%, half of companies surveyed (50%) said they are moderately to highly vulnerable to information theft, up sharply from 38% in 2010. Moreover, IT complexity is the leading cause of increasing fraud exposure, cited by 32% of respondents compared with 28% last year.
- The level of concern expressed by companies increased sharply over the past year: Overall, concerns among executives around the globe rose between 10 – 15% for all of the frauds covered in the survey, led by information theft (50%) and corruption and bribery (47%).
The report is chock-full of interesting information, so I suggest downloading the report in its entirety, which you can do by clicking here.
Beefing Up Internal Controls
Can your organization afford to ignore the risks of fraud? I didn’t think so. The report shows that more companies are worrying about fraud, but they don’t seem to know where to start to implement anti-fraud measures. Since internal fraud is on the rise, taking a good look at the risks within your organization is a good place to start. Everything from the tone at the top to hiring the right people can help prevent workplace fraud.
In an interview with Stephen Pedneault, he talked about the importance of internal controls and how anti-fraud measures don’t need to suck up your entire budget:
Many small business owners say they don’t have the resources to segregate tasks, for example, which is one of the most important methods of fraud prevention. “I entirely disagree,” says Pedneault. “I can take a company that consists of an owner and an employee and I could segregate the internal controls so long as the owner will be involved in the process and will take on some responsibilities. For example, whoever has access to accounts payable and has access to the cheque stock shouldn’t be the person who signs cheques, shouldn’t be the person who gets the signed checks back and shouldn’t be the person who mails the signed cheques out.”
Internal controls are all about reducing the opportunity for fraud to occur. Employees should only have access to the accounts and information they need in order to complete their job. Other methods for reducing the opportunity for fraud include:
- Segregating duties
- Ensuring proper authorization for transactions
- Providing independent checks on performance
- Using an anonymous reporting system
- Monitoring access to data, assets and systems