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.