The explosion in electronic theft, which has taken over physical theft as the main cause of fraud at companies, is putting many companies at risk of major potential losses. This is according to the annual 2010-11 Global Fraud survey on fraud, conducted by risk consultancy Kroll, which found that companies lost $1,7m to fraud for every $1bn in sales, a 20% increase on the year before.
The opportunity for electronic theft has increased hugely in recent years. The majority of work carried out by companies nowadays is done electronically, increasing the opportunity for fraudsters to take advantage for this kind of theft. The survey revealed that financial services firms, in particular, are often the most exposed to the risk of fraud as they can suffer physical theft, internal financial fraud and financial mismanagement.
The sad reality, however, is that fraud is most likely to be committed by employees with the company. A recent survey by ITWeb showed 71% of organisations had discovered fraud committed by employees in the past three to five years. South African companies allocate millions of rands each year in an attempt to stamp out fraudulent claims from customers and those outside the company but very often this threat comes from their own employees.
It’s essential that companies continue to focus their efforts on what happens among their own staff and outside the organisation. We must ensure that our employees have the knowledge and experience to identify fraudulent transactions, can act on it in time, and have effective systems at their disposal to identify fraud and deal with it in an effective manner.
The impact of not dealing with the increase in fraudulent claims will be most felt by consumers, as it is they who will ultimately bear the brunt as insurers are forced to increase premiums in an effort to recoup their losses. There is an urgent need for industry experts and professionals to address this issue by looking out for the ‘red flag indicators’ that can assist in the early detection and identification of fraudulent acts. Some of the indicators that one should look for in terms of individuals in the organization include high personal debt, not taking annual leave, a feeling of being underpaid, insufficient recognition in their job and a close association with suppliers.
There is no hard-and-fast rule to determine whether an individual is, or is likely to, commit fraud; however, it is important to look out for any obvious signs as these can provide a way of nipping such problems in the bud at an early stage.
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