Every two years, the Association of Certified Fraud Examiners (ACFE) performs and publishes research on worldwide organizational fraud. These reports have rearranged the landscape on organizational fraud by providing a bedrock data-based description of the incidence, characteristics and impact of fraud on organizations of all types.
The 9th report in this series, the 2016 Report to the Nations on Occupational Fraud and Abuse, continues and expands the information available to organizational managers to help shape their risk management strategies to combat organizational fraud. With the sound methodology repeated by these studies over time, some solid trends have been established, but we can also see some emerging threats.
Here are 17 facts that can help you to understand and respond to the threat of organizational fraud in your organization:
This week is International Fraud Week, an annual awareness effort organized by the Association of Certified Fraud Examiners (ACFE) to shine a spotlight on fraud. It is estimated that fraud costs approximately 5 percent of annual revenue for organizations worldwide. The seriousness of the global fraud problem is why, throughout the year, we provide our clients and other organizations with tips and information to fight fraud and safeguard businesses and investments from the growing fraud problem.
Here we share 6 of our most-read fraud-related resources:
Our latest whitepaper, Occupational Fraud: A Hidden Killer of Organizational Performance, provides an in-depth look at the complexities of occupational fraud, so you can prevent, detect, minimize, and/or recover from it.
The value of the fraud triangle is that it helps us to look at the objective factors that must be present for fraud to occur. Recognizing these objective factors helps to define actions you can take to help prevent fraud, partly through organizational policy controls and partly through managing the relationship with employees to encourage openness and trust.
In the 2016 update to the invaluable Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) analyzed 2,410 cases of occupational fraud that cost more than $6.3 billion in losses. Extrapolate this to the total number of organizations at risk and you can understand why ACFE has found in report after report that about 5% of top line revenue is lost to fraud every year, worldwide (download the ACFE The Staggering Cost of Fraud PDF).
Unlike the human capital risks of complacency or turnover, occupational fraud is an intentional act to steal from the organization. It involves a conscious attempt by someone within or linked to the organization to seek “personal enrichment through the deliberate misuse of misapplication of the employing organization’s resources or assets” (ACFE).
Needless to say, fraudsters have every incentive to remain hidden, so a well-executed fraud can go on for years. The intentional, hidden nature of fraud puts the emphasis in risk management on identifying potential fraudsters (preferably before you hire them) and limiting and monitoring the opportunities for fraud.
Occupational fraud is a common problem. It is even more common than most businesses know, since many incidents are never even detected. When fraud hits, a business can be devastated by the financial costs, along with damage to morale and reputation. The costs are massive.
The 2016 Association of Certified Fraud Examiners (ACFE) report cites more than $6.3 billion in damages from a survey set of 2,410 businesses. Global losses from 2015 are projected at more than $3.7 trillion, with median losses around $150,000 per incident.
A recent report out from the Association of Certified Fraud Examiners (ACFE) confirms a growing and alarming trend – occupational fraud continues to rise, and with it businesses are ravaged by massive costs. The multi-layered impact of occupational fraud affects nearly every industry in every region worldwide – from the US and Canada, throughout Europe, Asia, the Middle East, and into Africa.
It is estimated that approximately 5% of a business’ annual revenues are lost when occupational fraud hits, with many cases never even detected – so the true cost is ultimately unknown. The 2016 ACFE report cites more than $6.3 billion in damages from the occupational fraud cases studied worldwide, from a survey set of 2,410 businesses. Global losses in total are projected at more than $3.7 trillion.
The Sting of a Scheme
Occupational fraud typically covers three categories: asset misappropriations like theft, skimming, or fraudulent disbursements; corruption: including bribery, conflicts of interest, extortion; and financial statement fraud: misreporting as overstatement or understatement. While asset misappropriations are the most common, representing over 80% of cases, the median loss is reported at around $125,000. Comparatively, when financial statement fraud is involved (less than 10% of all cases) the impact can destroy a company, with a median loss of nearly $1M.
