Nearly 40% (38%) of UK businesses experienced internal fraud in the last 12 months, compared with a global average of just 27%, according to new research released today by Kroll, a division of Duff & Phelps. The only region which had a higher incidence of internal fraud was sub-Saharan Africa at 44%.
The report revealed that, despite suffering high levels of internal fraud, only 62% of UK business leaders viewed it as a risk priority, compared to a global average of 66%. This comes in the context of increasing pressure on the UK audit industry, with regulators cracking down on substandard performance, and demonstrates the need for improved audit processes and risk management strategies.
Kroll’s annual Global Fraud and Risk Report, with research conducted by Forrester Consulting, examines the current global risk landscape, understanding the biggest risks facing global companies and the steps being taken to prevent, detect and respond to daily threats.
The most prevalent incident affecting UK firms in the last 12 months was reputational damage due to third-party relationships, suffered by 42% of all UK businesses—13 percentage points higher than the global average of 29%. Almost four in ten (38%) businesses also suffered from leaks of internal information, roughly in line with the global average (39%). Risks arising from adversarial social media activity was also high on the business agenda, with nearly a third (32%) of businesses experiencing a major incident over the last year, five percentage points higher than the global average (27%).
More than three quarters (77%) of business leaders surveyed said that data theft was a priority, the highest of any risk, despite only 32% of companies actually suffering an incident of this type. This could be explained by the recent implementation of the General Data Protection Regulation (GDPR), which has made businesses much more concerned about data privacy issues. This could also be behind cyber security measures registering as the most effective risk detection mechanism, with 77% of respondents agreeing that their cyber detection mechanisms are effective as businesses have increased investment to help mitigate cyber risk.
Looking to the future, 70% of those surveyed in the UK viewed the collapse of free trade agreements as the biggest future risk facing their company. Almost two-thirds (64%) also viewed political instability as a potential future threat, and changes in economic treaties between countries was seen as the most significant geopolitical risk. It’s highly likely that the UK’s exit from the European Union is behind these fears, with continuing political uncertainty fueling business concern.
Technology also looks set to remain as a key element of the risk landscape moving forward, as 68% of UK business leaders see disruptions caused by AI or other technologies as a significant future risk. Large-scale, coordinated cyberattacks are also a threat which will continue to drive risk management strategies, with two thirds (66%) of those surveyed viewing it as a future risk that will affect their business. This includes cryptocurrency, which is growing in both prominence and implementation with nearly 89% of UK business leaders reporting involvement with the technology in at least some way.