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News & Articles

Business Fraud on the Rise - Are You Adequately Protected?

26 August 2010

One in three companies around the world have reported at least one incidence of fraud in the last 12 months, with Australia ranking among countries with high levels of economic crime, according to an international survey.

The PriceWaterhouseCoopers (PWC) annual Global Economic Crime Survey found insurance, financial services and communications companies reported the highest levels of fraud. The majority of fraudulent acts in all three sectors were perpetrated by people external to the company.

In sectors such as hospitality, manufacturing, retail and professional services, employees were mostly responsible for the criminal acts.

Almost half of respondents believed the incidence and cost of fraud were higher compared with the previous year.

But the survey found that the Global Financial Crisis did not have a particular impact, with companies which were largely unscathed by the financial downturn reporting similar levels of crime. However, companies which ere hit by recession reported notably higher levels of one type of economic crime – accounting fraud.

“Hence, we conclude that economic crime remains a pervasive business risk, which does not discriminate among its victims based on the relative degree of their financial performance,” the report said.

Australia was in the top bracket of countries affected by fraud. While 40% of Australian companies which responded to the survey reported fraud, they were behind Russia (71%), South Africa (62%), Canada (56%) and the UK (43%).

The three most common types of crimes were asset misappropriation, accounting fraud and bribery and corruption. Accounting manipulations were most common in family-owned businesses.

The report warned that fraud risk assessments are essential for identifying potential fraud threats and weaknesses in controls that create opportunities for fraud. Most frauds (17%) were detected by internal audit.

“In the light of the apparent increase in the level of economic crime reported by respondents, it is alarming to see that, in the last 12 months, 28% of respondents did not perform a fraud risk assessment and another 31% performed this task just once,” PWC said.

National Insurance Brokers Association CEO, Noel Pettersen, said the PWC report was a timely reminder to businesses to not only review their internal controls, but also to check with their broker to ensure they were covered for any loss arising from a fraudulent act.

Source: NIBA Insurance Today Summer 2009 - 2010

There are number of insurance products which can protect your business against fraud, contact McKenzie Ross Insurance Brokers to discuss the right cover for your business.