LONDON: UK businesses are losing an estimated £98.6billion annually to fraud, according to a report undertaken by the University of Portsmouth’s Centre for Counter Fraud Studies, and accountancy firm PKF Littlejohn.
Professor Mark Button, co-author of The Financial Cost Of Fraud 2015 report and director of the Centre for Counter Fraud Studies, says: “The key questions for any organisation are how much does fraud cost us, and how well are we protected against it?
Unless you know the nature and scale of your fraud problem and whether you are properly protected against it, how can you act proportionately?”
According to the report, once the extent of fraud losses are known within a company, they can be treated like any other business cost – something to be reduced and minimised in the best interest of the financial health and stability of the organisation concerned.
PKF Littlejohn has seen reductions in fraud in companies of up to 40 per cent within 12 months just through measuring the extent of it within a company and then putting in actions to prevent any further losses.
Jim Gee, head of Forensic and Counter Fraud Services for PKF Littlejohn, says: “Beating fraud is every company’s business. If a business was paying 6 per cent over the odds for its energy and utilities, or rental properties, then management would be quick to act, or shareholders and investors would want to know why. Fraud is the last great unreduced business cost.
“In these current economic times, it will take a brave chief executive or director of finance of any organisation who turns a blind eye to these findings,” Gee continues. “More than two thirds of the exercises we reviewed showed fraud-related losses of more than 3 per cent of expenditure, with the 17-year average running at 5.6 per cent but with some areas
of expenditure, such as procurement, rising to anywhere between 7 and 18.7 per cent.”
The research also found that fraud continued to increase after the recession.
Gee says: “It may be that longer-term social and technological factors are an underlying cause of the growth of fraud, such as a greater individualisation (less adherence to collective moral and ethical ‘norms’ driven by increased isolation as we all retreat inside our digital devices); the increased complexity of processes and systems (it becoming easier to disguise fraud amid this complexity); fewer face-to-face transactions (fraudsters feeling more distant from the victims of their dishonesty and thus less concerned about any response); more people under financial pressure during the financial crisis; and the increasing pace of change in business (with controls struggling to keep up).”
