Pandemic has left many businesses wide open to fraud, with cyber fraud against Irish firms double international levels.
Business fraud and economic crime has reached an all-time high with more than half (51pc) of firms experiencing fraud in the last two years, according to new research from PwC.
This compared with global companies (47pc). Of those that experienced fraud, 61pc experienced two or more frauds in the two-year period.
“Increased remote working may lead to an increased likelihood of successful phishing or smishing attempts”
Not only that but cyber crime (69pc) is now the most prevalent form of fraud committed against Irish businesses.
The PwC Irish Economic Crime Survey 2020 is part of a global study examining businesses in 99 countries.
According to PwC Ireland cyber leader Pat Moran many businesses suffered increased levels of fraud during the pandemic crisis.
“As the Covid-19 pandemic continues, many organisations continue to review their business models in an attempt to operate with a reduced cost base,” said Moran.
“However, this may give rise to a perfect storm for fraud: for example, increased remote working may lead to an increased likelihood of successful phishing or smishing attempts as security defences may have become weakened.”
The study reveals that the levels of cybercrime experienced by Irish companies are double that experienced on average globally (34pc) and that the impact of cybercrime in Ireland is three times more disruptive than the global experience.
“This is a significant finding given that Ireland is now Europe’s largest data hosting cluster. This finding is a concern for Ireland’s digital economy and highlights the importance of continued investment and resources in cyber security to mitigate cyber risk and ensure we are cyber resilient at a national level.”
Customer fraud and accounting fraud
Four out of ten (41pc) Irish respondents experienced customer fraud, higher than global peers (35pc).
Fraud committed by the customer is one of the types of fraud where dedicated resources, robust processes and technology have proven most effective for prevention. Other common frauds in Ireland are asset misappropriation (23pc), accounting fraud (15pc) and money laundering (13pc).
Deirdre McGrath, partner, PwC Ireland Forensics, commented: “When we look at fraud by industry sector – our survey shows cybercrime, customer fraud and accounting fraud are the three most disruptive types of fraud across the sectors. This is not surprising in our experience, given the potential for these types of fraud to not only cause financial damage, but also impact on brand, reputation, employee morale and market share.”
Counting the cost of fraud
Fraud hits businesses from all angles and the costs can be huge.
Over one in ten (13pc) Irish respondents who experienced fraud in the last two years reported losing more than €4m. A further 18pc said that the cost of the fraud was immeasurable or they did not know its cost.
A similar proportion (11pc) said that they spent over €800,000 on remediation after the incident, including for example improving internal controls, conducting training and introducing new technologies. These costs can often be as or more significant than the costs of responding to the fraud incident in the first instance.
Sixty two percent plan on increasing the resources used to combat fraud in the next two years.
Suspicious activity monitoring (28pc) was the most common way in which fraud was detected by Irish companies – though there is room for an increasing role for analytics and software in the detection of fraud. Nearly a fifth (18pc) of frauds were discovered either by tip-offs or by accident.
Surprisingly, the majority of survey respondents (62pc) reported that their organisation emerged in a better place following a fraud incident – citing attributes such as an enhanced control environment, streamlined and improved operations and introduction of new technology.
Technology continues to be underused in the battle against fraud with Ireland lagging global peers. Fewer than 2 in 10 Irish businesses strongly agree that they’ve been able to upgrade their technology to combat fraud over the last two years (Global: 29pc), largely due to cost.
While technology is just part of the answer in fighting fraud, the report finds that more use of disruptive technologies can be made. For example, Irish businesses are lagging behind global counterparts in utilising or finding value from Artificial Intelligence (AI) – a technology that is even more prevalent today – as a fraud-fighting tool. 58pc of Irish organisations are not using or finding value from Machine Learning (ML) versus 31pc globally.
“Economic crime is on the rise in Ireland,” Deirdre McGrath concluded. “To combat fraud, businesses need to relook at their risks in this new environment, and the suite of anti-fraud tools they use to prevent and detect fraud. Importantly, the right governance and a good culture are also required to effectively fight fraud.”
Written by John Kennedy (firstname.lastname@example.org)
Published: 10 September, 2020