Eight in ten (84%) mid-sized businesses in the UK experienced fraud in 2021, with more than a third (37%) of companies reporting an increase on the previous year, according to a new survey from accountancy and business advisory firm BDO LLP.
Average losses totalled £223,000, with the professional services, leisure and finance sectors the hardest hit. Almost a third (30%) of firms reported suffering security breaches through cyber-attacks over the last 12 months.
BDO’s Fraud Survey – which monitored fraud trends at 500 mid-sized UK firms throughout 2021 – found that while one third (33%) of these frauds were externally generated, the majority (38%) involved collusion between internal and external individuals, while more than a quarter (29%) were committed against companies by their own employees.
The ongoing impacts of the pandemic and associated lockdowns have exacerbated the risk of being targeted by fraudsters, with many citing the shift to remote working as a driving factor. Of those surveyed, approximately nine in ten (89%) business owners and directors think their company is more exposed to fraud since 2020, while almost a quarter (23%) believe their exposure has “significantly” increased. The overwhelming majority (89%) said fraud risks at their business have increased as a direct result of home working.
With millions of employees continuing to work from home – often without access to workplace IT support – the threat posed by scammers remains heightened. However, businesses with employees working on-site also remain vulnerable, with considerably more than half (67%) of the firms impacted by fraud reporting that their employees had predominantly operated from the office or work premises over the last 12 months.
Despite the rising number of frauds committed against mid-sized firms, a quarter (26%) of business owners think the level of fraud awareness among their employees has declined since the onset of the pandemic as fraudsters deploy increasingly sophisticated tactics. Nevertheless, six in ten (63%) of the businesses surveyed have not implemented fraud awareness training programmes for their employees over the last year, while one in five (21%) don’t have a fraud response plan in place.
Looking forward, almost three quarters (69%) of company owners and directors are concerned about their business being targeted by fraudsters over the next 12 months – with 15% stating they are “very concerned.” However, 85% said resource constraints as a result of COVID-19 disruption will limit their investment in fraud detection and prevention tools over the coming year.
Commenting on the findings, Kaley Crossthwaite, head of fraud at BDO LLP, said: “Despite impacting so many businesses and individuals, fraud remains under reported, under investigated and under prioritised.
“Ongoing disruption wrought by the pandemic – including home working which has added complexity to the process of identifying and defending against cyber-attacks – has magnified the risk for businesses. The increasingly sophisticated and opportunistic tactics being developed by fraudsters have also outpaced the protections being implemented by many firms.
“As organisations re-evaluate their hybrid working models for the year ahead, they should pay particular attention to robust internal controls, including strengthening their fraud risk management programmes to lessen their exposure to financial crime.”
