UK businesses should focus more on tackling internal fraud
Nearly four in every ten UK businesses have been hit by internal fraud in the last 12 months, according to a new study. Data leaks and thefts, and third-party leakages are the most common types of fraud.
Over the last two decades, the value of fraud in the UK has rocketed by billions. While the annual fraud bill of Britain seemed to fall in the last year, firms chasing rapid digital transformation continue to present a plethora of opportunities for criminals in the country, just as they do across the world.
According to a new global investigation from Duff & Phelps subsidiary Kroll, 38% of UK businesses have been hit by internal fraud in the last 12 months.
That alarming figure dwarfs the global average of just 27%, and threatens to get worse in coming times. This is because, the researchers say, only 62% of UK business leaders actually view internal fraud as a risk priority (the global rate is 66%), despite the fact that only sub-Saharan Africa had more incidences of internal fraud (44%).
Respondents did not, however, deem that internal fraud had the greatest impact on their firms. Instead, UK firms reported that the biggest knock in the last 12 months was reputational damage due to third-party relationships, suffered by 42% of all UK businesses – 13% higher than the global average of 29%.
As a result, cautious UK respondents were found to be more likely than average to practice reputational due diligence on the full range of stakeholders, from board candidates (98% vs. 91%) to social media influencers (89% vs. 85% globally).
Tackling the threats posed by internal contractors promises to do little for the exposure of firms to internal fraud, however. According to the study, contractors account for just 8% of internal fraud incidents, compared to full employees, who are behind 45% of such occurrences. If companies are to improve the situation, then, they will need to take an equally cautious approach to internal fraud, while drawing up a business training strategy that will help to minimise the chances of it occurring in future.
Neil Kirton, head of Kroll's London office, commented, “The range of risks facing UK businesses has widened significantly in recent years, with new global regulations, more complex supply chains reaching around the world and ever-evolving cyber threats. The UK has been particularly vulnerable to internal fraud and reputational damage from third-party relationships, and other threats continue to rise. Businesses can prepare for these challenges by having effective, tailored strategies to both mitigate risks in the first instance, and also respond to incidents effectively should their tactics fail.”
