Breaking finance and business news, tax information, jobs and more for finance directors and senior finance professionals.

Management

Senior level staff 'greatest fraud threat'

Written by Catherine Murray

Wednesday, 10 October 2007

The UK’s largest commercial insurer has issued a stark warning to companies to face up to the uncomfortable fact that senior level staff may pose the greatest fraud threat.

The warning, from Royal & SunAlliance (R&SA), comes despite research among senior managers in businesses across the UK, which shows that nearly a quarter (24 per cent) of respondents believe ‘hackers’ present the greatest threat to their businesses, followed by ex-employees (14 per cent) and suppliers (9 per cent).

Despite the perception of disgruntled ex-employees defrauding their former employers, the reality is that most fraud is committed by those still on the pay-roll, and they are often long standing members of staff in senior positions left to their own devices, whose actions are rarely questioned. Only 8 per cent of those interviewed thought that people like themselves – senior managers – would be likely to commit the most serious types of fraud.

The research also revealed a laid-back attitude to the threat of fraud in general, with two thirds (66 per cent) of businesses thinking it unlikely that their company would be affected by fraud in the future. However, one in 10 (9 per cent) of those interviewed said their business had already fallen victim. This figure does not take into account ongoing frauds which are yet to be uncovered.

Mark Witchell of Professional and Financial Risks at R&SA warned: “While businesses are more likely to believe that external threats such as computer hackers or ex-employees pose the greatest threat, they need to wake up to the possibilities of staff fraud. In our experience, fraud is often perpetrated over a number of years and is only discovered by chance. The cost can be huge and the consequences disastrous, in some cases leading to the closure of business.”

Nicholas Allen of Professional and Financial Risks at R&SA added: “We recommend that in order to protect themselves, companies should consider purchasing Employee Fidelity insurance as part of a wider risk management solution. In addition, by ensuring that rigorous fraud control procedures are in place, fraud can be prevented or stopped before serious damage is done. It is essential that companies avoid a laissez-faire approach which will allow fraud to flourish unchecked.”

Related articles

Related links