Mazars research shows Irish businesses suffering losses due to fraud and abuse

Irish business research undertaken by Mazars Ireland shows that businesses are experiencing financial loss due to occupational fraud and abuse. Of those senior business leaders surveyed, approximately 50% had experienced a loss due to occupational fraud and abuse over the past two years, with the average financial loss being between €10,000 and €20,000.

The research also pointed to a worryingly low level of awareness of anti-bribery and corruption legislation amongst Irish businesses, with 50% unaware of the recent Criminal Justice (Corruption Offences) Act 2018 which introduced the new corporate liability offence and allowed for a corporate body to be held liable for the corrupt actions committed for its benefit by any director, manager, secretary, employee, agent or subsidiary.

Other key findings of the research included:

· 12% of respondents suffered losses greater then €500,000 over the past two years.

· The principal causes of such losses related to the theft of cash and goods but businesses also experienced losses due to expense fraud, payroll, invoice fraud and conflict of interest issues.

· 33% of the fraud was detected via internal audits with 25% detected via whistle-blowing/speak up channels.

· Nearly two thirds (65%) had not undertaken a formal fraud risk assessment or implemented proactive data monitoring across their business operations.

· Approximately 34% of respondents did not have formal investigation procedures or anti-fraud policies in place. Such weaknesses undermine an organisation’s ability to respond to fraud and abuse cases in a structured manner and increase the risk of damage to their reputation and brand value.

· 40% placed a high degree of reliance upon the Head of Internal Audit to perform Investigations. This is challenging for such leaders when considering the higher degree of risk in such engagements and the need for specialist investigation skills.

· 80% provided a strong indication that they have whistleblowing or speak up arrangements in place, which should give comfort to employees in allowing them to use this as a channel to report issues.

· 40% indicated that, in addition to staff, customers and suppliers could use the whistleblowing arrangements within their organisations.

The cost of occupational fraud and abuse

Commenting on the research and results, Justin Moran, Director, Forensic and Investigation Services, Mazars noted: “This research provides important insights in respect of the cost of occupational fraud and abuse impacting businesses across Ireland and importantly highlights the potential vulnerability of organisations. The findings indicate the need for a more proactive approach to identifying and mitigating fraud-related risks, and at Mazars we recommend businesses undertake more proactive Fraud Risk Assessments to identify what controls are in place to deter the threat of fraud.”

“While the research indicates that theft of cash was most common at 32%, a broad array of abuses were noted indicating that businesses across all sectors are at risk. Regardless of the amount or perceived severity, fraud fundamentally threatens the viability of a business, impacting not only owners but also employees and customers alike. It is therefore incumbent on business leaders to take positive action to protect both reputation and brand”.