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Financial fraud

The consequences of fraud can be devastating for a business of any size. The financial impact alone can force a company to go under, while the reputational blow can also be difficult to recover from.

It's therefore worth asking yourself if you have the right security measures in place, as well as adequate awareness of the problem and the ability to manage it throughout your business.

A new survey by financial tech provider Bottomline Technologies paints a rather worrying picture of the current state of play for UK businesses.

In 2016, 37 per cent of financial decision makers cited external fraud as a worry. But in the same survey this year, 56 per cent said they are concerned about the issue.

Similarly, the proportion of financial decision makers expressing worry about internal fraud has gone up from 13 per cent to more than 30 per cent - that's a 138 per cent increase.

So why are businesses becoming so much more worried about this hazard?

The problem might lie partly in the fact that many respondents aren't always sure if they have actually fallen victim to financial fraud.

Indeed, a staggering 56 per cent of respondents admitted they did not know whether or not they had been impacted.

Just 12 per cent of those polled could be certain that they had been targeted by a fraudster at some point.

Is this a reflection of how the nature of the threat makes it difficult to accurately measure, or a sign that they don't have robust enough processes monitoring what goes out and where it's going?

Well, a separate survey from Financial Fraud Action UK published last year suggests the latter may be true in many cases.

Some 69 per cent of business leaders and managers admitted to not taking any steps to safeguard their firm and their workforce from financial fraud.

Figures showed that 48 per cent had minimal concern about being targeted by scammers, while 49 per cent said it is not likely to happen to their business.

This points towards a worrying and startling level of complacency around the issue, particularly as the same survey found that 28 per cent of businesses admitted to falling victim to a scam or dealing with attempted scams in the previous two years.

Financial cost of fraud falls, but nature of threat evolving

One interesting finding of the Bottomline Technologies study is that the proportion of firms reporting that at least ten per cent of their company's revenue had been affected by fraud is dropping.

Thirty-six per cent of those who were certain they have been on the end of fraud said this in 2015.

By contrast, just 17 per cent estimated they were affected to this extent in 2016.

But this shouldn't be taken as a sign that the situation is improving. Instead, it is a reflection of how the nature of the threat is evolving, with businesses now more likely to be hit by smaller-scale scams.

In fact, figures show that the proportion of firms claiming that up to ten per cent of their revenue has been affected by fraud rose by a staggering 28 per cent in 2016 to 68 per cent.

This certainly suggests that scammers are deploying a different approach and demonstrates the need for businesses to stay on top of how they handle this ever-evolving threat.

Ed Adshead-Grant, general manager of payments at Bottomline Technologies, has insisted that business leaders cannot be complacent when it comes to preventing financial fraud.

"Companies have a duty of care for customers and suppliers that they have the correct security measures to protect their payments and financial processes," he commented.

"It is important for organisations to have robust measures to prevent loss due to error and fraud, in particular, ensuring payments are being made to correct suppliers - not fraudsters."

Mr Adshead-Grant identified account validation and verification measures as two good options for businesses, as they are easy to integrate and use on their vendor database, rather than at the point of payment submission.

As a result, errors and other indications that a scam is taking place could be identified much earlier in the process.

The findings of recent research into the attitude of businesses towards financial fraud are frustratingly unclear.

While on the one hand, concern about the issue is growing among financial decision makers, it is obvious that on the other, many are not doing enough to safeguard their money or are even fully aware of the extent of the problem.