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What is the financial cost of fraud to your organisation?
Fraud is a challenging problem. Its economic effects are clear – worse public services, less financially stable and profitable companies, diminished levels of disposable income for all of us except the fraudsters. However, historically, fraud has been described as ‘difficult to cost’¹ and, until relatively recently, it has not been possible to quantify these effects. However, over the last decade the situation has changed..
Of course, there are still some estimates published which are simply not reliable. Counting only those losses which are detected, or surveying those working in the area for their opinion, will never be accepted as a robust measure of the real financial cost of fraud.
The most recent global study, undertaken by Jim Gee, PKF’s Director of Counter Fraud Services, with the University of Portsmouth, reported the latest, accurate, statistically valid information from around the world about the real financial cost of fraud and error. It reviewed 132 exercises to accurately measure fraud and error losses, covering 32 different types of expenditure, in 44 organisations from 9 countries with a total of expenditure valued just under £3 trillion sterling equivalent. It found, across this massively representative sample, average losses of 4.57%.
Financial benefits of 2% of expenditure within 12 months
Once the extent of fraud losses is known then they can be treated like any other business cost – something to be reduced and minimised in the best interest of the financial health and stability of the organisation concerned. PKF offers a service to do just that – to measure and reduce such losses, with reductions of up to 40% within 12 months possible and a 12 : 1 return on the cost of the work. lt becomes possible to go beyond reacting to unforeseen individual instances of fraud and to include plans to pre-empt and minimise fraud losses in business plans.
In almost every other area of business life, organisations know what their costs are – staffing costs, accommodation costs, utility costs, procurement costs and many others. Fraud and error costs, on the other hand, have only very rarely had the same focus. Because of this, fraud is now one of the great unreduced business costs.
... we can provide the answers
Now that we can measure fraud and error losses, we can make proper judgements about the level of investment to be made in reducing them. Now that we can measure these losses, we can measure the financial benefits resulting from their reduction. In the current tough business climate, reducing these losses is one of the least painful ways of reducing business costs. We can help client organisations to do that as well as providing specialist training for staff to allow ongoing in-house measurement of the problem.
Find out more
The cost of PKF’s fraud loss measurement reduction service varies. We provide a comprehensive Report indicating the losses suffered by a client organisation so that you can make an informed judgement on how much it is cost-effective to spend in reducing them. We can complete this work within as little as three months.
Download our free Fraud Loss Measurement flyer here
To find out more please ring 020 7065 0557 or Email jim.gee@uk.pkf.com. | |
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