the risk management blog

16 Fraud Facts to Fuel Your 2016 Prevention Planning

As we look toward 2016, we thought it might be useful to get a quick big picture on organizational fraud for context. We have been posting about the causal factors driving fraud and urging you to develop an effective risk-based prevention program. Now, here’s the why: 16 facts about fraud drawn from the 2014 ACFE Report to the Nations that should make it relevant to you.

1. Overall, survey participants estimated that organizations lose about 5% of topline revenue every year. That’s $3.7 trillion in 2013 Gross World Product (GWP).
2. The median loss for a fraud episode was $145,000, but that conceals a wide variation in amounts. 22% of cases cost $1 million or more.
3. The median duration of a fraud—the length of time between inception and detection—was 18 months.
4. Asset misappropriation was the most common of the three types of fraud, occurring in 85% of reported cases and costing a median $130,000. The least common type was financial fraud at 9%, but these were extensive thefts with a median loss of $1 million. In between, corruption occurred in 37% of cases at a median cost of $200,000.
5. 30% of the reported frauds involved more than one type of fraud.
6. Over 40% of cases were finally detected through a tip, about half of which were from an employee.
7. Organizations with hotlines were more likely to uncover a fraud by a tip.
8. Organizations of all sizes and types experience fraud: for profit, not for profit, governmental, and in all industry sectors.
9. Smaller organizations suffer disproportionately larger losses than larger organizations.
10. Fraud varies by industry, with financial services, government, and manufacturing having the greatest number of cases, but with losses per case higher in mining, real estate, and oil and gas.
11. Anti-fraud controls work. Organizations reporting fraud that had these controls in place experienced smaller losses and shorter duration of a fraud episode.
12. Fraud occurs at all levels of the organization, including employees, managers, and owners/executives.
13. The more authority held by the fraudster, the greater the losses.
14. Collusion helps fraudsters evade controls. The losses from fraud schemes increased as the number of people involved increased.
15. Certain departments were reported as more susceptible to fraud: accounting, operations, sales, executive/upper management, customer service, purchasing, and finance.
16. Recovering losses was slow and uncertain. Only 14% of participants had recovered ALL losses, and 58% had recovered NONE at the time of the survey.

These facts reveal the reality of organizational fraud and the important role of an effective fraud risk management approach. As we wrap up this year’s International Fraud Awareness Week, we hope you are better informed and more motivated than ever to address the areas of weakness or vulnerabilities in your culture, processes, and policies.

Every organization is at risk of fraud. And every organization can lower that risk with the right approach. Request a meeting with a Lowers Risk Group consultant to find out more about how your organization can fight fraud.