Manufacturers see fraud rise in 2016

By Gwen Ridler

- Last updated on GMT

Up to 89% of manufacturers have reported they've been affected by fraud in 2016
Up to 89% of manufacturers have reported they've been affected by fraud in 2016

Related tags Risk

Up to 89% of global manufacturing businesses – including food and drink manufacturers – have been affected by fraud in the past 12 months, according to analyst Kroll.

Kroll’s Global Fraud and Risk Report 2017 found that manufacturing fraud was 7% higher than the global average and was 7% higher than in 2015.

The most common types of fraud were information theft (30% of respondents), regulatory or compliance breach (30% of respondents) and intellectual property (IP) theft (26% of respondents).

Manufacturers reported junior employees as being the most common perpetrators of fraud within their companies (39%).

Higher than global average

Freelance and temporary employees were the second most common perpetrators at 37%, 10% higher than the global average.

However, professor Lisa Jack of the University of Portsmouth argues most frauds were actually committed by people who had been with the company a long time.

Jack told delegates at Food Manufacture’s Food Safety Conference in October last year: “I hate to tell you, but if you look at the research and statistics, most frauds are carried out by people who are long-­standing and were trusted.”

The report also found 91% of manufacturers had been hit by cyber-attacks and information loss, theft or attack.

Trade secrets, research and development, or IP were also specifically named as the target by just over half (52%) of all respondents, with customer records being the most targeted (reported by 63% of all respondents).

Tommy Helsby, Kroll investigations and disputes co-chairman said: “This year’s report shows that it’s becoming an increasingly risky world, with the largest ever proportion of companies reporting fraud and similarly high levels of cyber and security breaches.

“With fraud, cyber, and security incidents becoming the new normal for companies all over the world, it’s clear that organisations need to have systemic processes in place to prevent, detect, and respond to these risks if they are to avoid reputational and financial damage.”

‘Incidents becoming new normal’

Companies are more at risk of fraud as they rely more and more on technology and international supply chains, claimed Kroll investigations and disputes co-chairman Dan Karson.

“Many of the challenges organisations face could be reduced through the implementation of employee and partner education programmes or a tighter set of policies that help remove avoidable errors and poor business practices,” ​said Karson.

Meanwhile, National Food Crime Unit boss Andy Morling said more work needed to be done to protect the nation against food and drink fraud.

Who is most likely to commit fraud according to Kroll

  • Junior employees 39%
  • Freelance/temporary employees 37%
  • Senior or middle management employees 33%
  • Ex-employees 33%
  • Vendors/suppliers 33% 

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