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Fraud is on the rise: step up to the challenge
Introduction The threat of fraud is one of the most common challenges that organisations face without regard to size, industry, or location. Fraud is on the increase globally and is so devastating that it can bring an organisation completely to its knees. Several high-profile corporate collapses linked to fraud, such as Patisserie Valerie, Carillion, and Wirecard, have made headlines in recent years and shown the financial and reputational impacts of fraud. In the last two years, businesses have been under considerable financial and operational pressure due to the Covid-19 pandemic. This has created an ideal environment for fraudulent activity, where all elements of the fraud triangle (motivation, opportunity, and rationalisation) in which fraud thrives have been heightened. This is expected to continue – and get worse – as the war in Ukraine rages on, inflation in the UK hits a 40-year high, and the cost of living steadily increases. The world is in turmoil and fraudsters will take advantage of it. So now, more than ever, fraud should be on the
radar of all organisations and their internal audit functions. In its most recent global survey, the Association of Certified Fraud Examiners (ACFE) estimated that organisations lose 5% of their revenue to fraud each year.1 The 2019 Financial Cost of Fraud report estimates that the cost of fraud for the UK is between £130bn and £190bn a year.2 What is more, the Office for National Statistics (ONS) says that people are more likely to fall victim to fraud or cyber offences above any other crime. This gives an idea of the magnitude of the problem.
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Fraud Triangle
Rationalisation Personal justification of dishonest actions
1. Occupational Fraud 2022: A report to the nations, Association of Certified Fraud Examiners. 2. The Financial Cost of Fraud 2019: The latest data from around the world, University of Portsmouth and Crowe.
