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November 8, 2023
Fraud now costs UK businesses and individuals more than £137 billion a year, a major study has revealed.
Published by the University of Portsmouth Centre for Counter Fraud Studies, the data suggests that the Covid-19 outbreak has highlighted significant holes in companies’ cybercrime defences.
According to the study, the cost of fraud has increased by 88 per cent since 2007 to £137 billion each year.
But during the coronavirus pandemic alone, there has been a 19.8 per cent increase in fraud across England and Wales – suggesting that Covid-19 disruption has only worsened the impact of fraud.
And this could be attributed to weak or almost non-existent cyber security home working practices.
For example, almost six in 10 (57 per cent) employees working from home for a small organisation in 2020 were not provided with pre-approved devices, and instead relied on personal hardware and software, such as laptops, tablets and smartphones, to carry out their role.
And worryingly, just a third (34 per cent) of workers had received directions on how to work securely – such as installing antivirus technology, creating secure passwords and changing them regularly, and updating software to address emerging threats.
Commenting on the figures, report author Jim Gee warned that most fraud prevention strategies were “no longer fit for purpose”.
“Too many organisations adopt a reactive approach to fraud, seeking only to tackle it once losses have already occurred. That’s an antiquated viewpoint and a change of perspective is needed,” he said.
However, taking a proactive – rather than a reactive – approach to fraud could save the UK billions of pounds per year.
For example, companies who designed weaknesses out of processes and systems removed the opportunity for fraud – and reduced average losses by some 40 per cent.
If this were applied to the UK as a whole, businesses and individuals could save some £55 billion each year, the study reveals.
“They need to review, revise and improve their protection. Only about a third of fraud at best is detected but fraud is an ongoing cost that is making companies less profitable, making public sector organisations less able to deliver public services and charities less able to fulfil their charitable purposes. It’s the cost that does the most damage,” said Mr Gee.
He added: “What companies need to realise is that they are more profitable if the cost of fraud is no longer there. Data shows the return on investments to tackle fraud can be 12:1 or better.”
The report, entitled The financial cost of fraud 2021, can be found here.
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