GCC firms saw highest rise in fraud incidents globally last year: report
The Gulf region saw the highest rise in fraud incidents of any region across the world across the past year, reveals a new report.
Fraud, cyber and other security incidents are now the ‘new normal’ for Gulf companies, according to the executives surveyed for the 2016/17 Kroll Annual Global Fraud and Risk Report.
The proportion of executives that reported their companies fell victim to fraud in the past year rose significantly to 88 per cent from 62 per cent in 2015, highlighting the escalating threat to corporate reputation and regulatory compliance.
Cyber incidents were even more commonplace, with 90 per cent of executives surveyed saying their company has suffered a cyber incident over the past 12 months. More than eight in ten (82 per cent) reported the occurrence of at least one security incident over the course of the year.
Threats from within
Despite widespread concerns about external attacks, the findings reveal that the most common perpetrators of fraud, cyber and security incidents over the past 12 months were current and former employees.
Senior or middle management were cited as key perpetrators in nearly two-fifths (36 per cent) of fraud cases, followed by junior staff (34 per cent).
Third-party entities were also considered to have significant roles in most fraud incidents, with joint venture partners, vendors, suppliers and agents names by around a quarter of respondents. Former employees were also identified as responsible for 20 per cent of incidents reported.
More than half of the respondents (56 per cent) said insiders were the key perpetrators of security incidents, with permanent employees being cited as the most common of these (24 per cent).
Tom Everett-Heath, Regional Managing Director, Kroll, said: “This year’s Kroll Global Fraud and Risk Report has the highest proportion of companies reporting fraud and rising levels of cyber and security breaches. The impact of such incidents is significant, with punitive effects on company revenues, business continuity, corporate reputation, customer relations, and employee morale, as well as the risk of regulatory intervention.”
“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. As important is the need for effective, thorough and timely responses when incidents are detected,” he added.
Increasingly complex threats
The incidence of fraud in the GCC was six per cent above the global average of 82 per cent. The vast array of perpetrators and ever-evolving nature of incidents also reflect an increasingly complex risk management environment across the region.
A broad range of cyber incidents were reported. The single most common types of incident reported was a virus or worm infestation, reported by almost one-third of all companies (30 per cent) and data deletion or loss due to system issues (30 per cent).
In the age of big data, one-fifth (20 per cent) of respondents said data breaches resulted in loss of customer or employee data, while 16 per cent reported loss of IP, trade secrets, or R&D. More than one in four (26 per cent) suffered data deletion or corruption caused by malware or system issues, and ten per cent were victims of data deletion by a malicious insider.
The road to resilience
While insiders are cited as the main perpetrators of fraud, they are also the most likely to discover it. Half of the respondents in the GCC said that a recent fraud had been discovered through a whistleblowing program and 30 per cent said it had been detected through an internal audit.
Indeed, a majority of respondents indicated that their companies have adopted employee-focused anti-fraud measures such as staff training or whistleblowing hotlines.
Almost three-quarters of respondents have adopted anti-fraud measures focusing on information such as IT security or technical countermeasures and 68 per cent have implemented physical security measures.
Daniel Turner, an Associate Managing Director in Kroll’s Dubai office, commented: “The incidence of fraud, cyber and security incidents in the region continues to climb markedly. Companies are increasingly operating in a global business environment fraught with high and mounting risks and repercussions.
“These risks can be mitigated through the adoption of a conscious and proactive approach and through the implementation of employee and partner education programs and a tighter set of policies that help remove avoidable errors and poor business practices.”