Report pinpoints fraud as major threat to companies

Fraud by management and employees is a "greater threat to businesses than any other economic issue," according to business advisors PricewaterhouseCoopers (PwC)

Over the last two years, nearly 40% of Northern Ireland’s biggest private, public and not-for-profit organisations were victims of economic crime, with three-quarters of all offences committed by management or employees.

The biggest reported loss was over £500,000 with a third of victim organisations being defrauded up to three times in the last two years.

PwC partner Paul Kinney said: “We are now encountering an upsurge of fraud that hits staff morale, investor confidence and the value of the brand itself. Our survey suggests that every business in Northern Ireland is a potential victim of fraud that will be perpetrated by a handful of employees, managers and contractors. Currently, the cost of fraud is equal to paying two phantom workers who never show-up, never work but always get paid.

“Criminal managers and employees are systematically targeting their employers’ cash and assets. Sadly, this reflects on tens of thousands of honest people who take a pride in their business, their job and their personal integrity. The days of automatic trust are over.”

The report, which surveyed 108 of Northern Ireland’s Top-200 companies and 43 Government Agencies and not-for-profit organisations, reveals that only half of organisations actually press charges where fraud is uncovered.

Defending the low level of prosecutions, organisations claimed that the publicity surrounding fraud could be as damaging as the actual loss. Organisations cited negative publicity, poor conviction rates, and a slim chance of recovering stolen cash or assets.

Only 29 per cent of Northern Ireland organisations successfully recovered more than half of their losses from fraud, reflecting the higher incidence of internal frauds where the value of damages is often difficult to establish.

The report found that the bigger the business the bigger the fraud. Of 21 Northern Ireland organisations employing more than 5,000 employees, nearly half had suffered from economic crime in the past two years.

Those companies with over 5,000 employees suffered on average a loss of £100,000, and three-quarters of Northern Ireland companies thought the threat of economic crime would increase in the next five years.

The report also warned that cybercrime, from computer hacking to electronic fraud, is one of the biggest future risks, with a quarter of Northern Ireland organisations believing that they will be victims within five years.

(SP)