Many Midlands businesses are taking a short-sighted approach to the risk of fraud which is leaving them exposed to potential financial loss and reputational damage, according to new research by Deloitte and DWF.
The research, which analysed Midlands businesses’ attitudes to fraud, revealed that many organisations in the region are not going far enough to identify risks and take steps that will enable them to minimise the threat of fraud to their business.
While almost three-quarters (72%) of the Midlands firms that responded to the survey have fraud policies and procedures in place, 42% are of the view that their organisations were still exposed or very exposed to fraud. Further, 23% of respondents estimate that a high percentage of frauds in their organisations go undetected.
A lack of information for employees was also highlighted by the research, which indicated that three-in-five businesses don’t provide any training in ethics or anti-fraud programmes for their staff. Ongoing training can be a powerful weapon in the fight against fraud by educating staff about the danger signs they should look out for, who they should report any concerns to and keeping them up to date on possible threats to the organisation. Such engagement with staff is also a valuable means of understanding the key fraud risks that an organisation may face.
Furthermore, the survey research also highlighted that many organisations believe they could reduce their organisation’s fraud risk by implementing or improving whistle-blowing procedures e.g. employee fraud hotlines and aligned reward programmes. The Association of Certified Fraud Examiners’ (ACFE) recent Report to the Nations has consistently shown whistle-blowers to be the source of information most likely to lead to fraud discovery.
Adam Smith, partner at Deloitte explained: “Many Midlands firms should be applauded for having fraud policies and procedures in place. However, with fraud estimated to cost the UK over £30 billion a year, many still need to take fraud protection to the next level to properly safeguard their businesses. Organisations need to ensure that the procedures and checks and balances that they have in place are robust, work effectively and are regularly reviewed and updated to protect themselves against new threats.”
In addition, well over half of the survey respondents (57%) either don’t have, or are unsure if they have, a plan in place for how to respond to fraud and over half (53%) of organisations don’t have, or are unsure if they have, a fraud and corruption risk register. Such a risk register should be used by organisations to continually assess the risk of fraud and corruption within their business and help companies to take steps to mitigate against these risks.
Adam Smith, concluded: “Smaller businesses are both disproportionately victimised by fraud and notably under protected by anti-fraud controls. Companies, particularly smaller entities, need to take stock and ensure that their fraud policies and procedures are sufficient and are effective”.