Fraud is a pernicious problem which undermines the quality of the society that we live in. As a result of fraud, companies are less financially healthy and stable than they would otherwise be; public sector organisations are less able to deliver the quality of public services that we pay our taxes to get; charities are less able to pursue important charitable purposes because they cannot apply the full value of the donations that are made.
The most recent Government estimate is that fraud costs the United Kingdom £52 billion a year, but this is probably an underestimate as the latest global research indicates that losses to fraud and error (where they have been measured in a statistically valid and accurate manner) currently average more than 5%. It is important to understand that fraud is an ongoing, mostly high volume, low value cost, rather than simply an individual event which one hopes does not happen. Most entities have a level of underlying exposure to fraud irrespective of scale and line of business, and in proportion to how well protected (fraud resilient) they are. The questions assess your level of protection and therefore your likely cost of fraud.
Sometimes we are direct victims of fraud, but we are all indirectly victims as a result of its financial and economic impact. PKF and the Centre for Counter Fraud Studies (CCFS) at University of Portsmouth jointly manage the largest databases in the world concerning resilience to fraud and its measured cost, and we use them to provide the information needed for organisations to better protect themselves and to reduce the cost.
Two key questions are involved:
How much does fraud cost my organisation? and
How well is my organisation protected against fraud?
We can provide measured, calibrated answers to both these questions. A good starting point is this site, which provides free access to our Self-Assessment Fraud Resilience (SAFR) tool. It takes account of 29 different factors and looks holistically at levels of protection. It covers:
the extent to which an organisation understands the nature and cost of fraud to it as a business problem;
the extent to which it has an effective strategy in place which is tailored to address this problem;
the extent to which organisations maintain a counter fraud structure which can implement this strategy successfully;
the extent to which the structure efficiently undertakes a range of pre-emptive and reactive action;
the extent to which results are properly measured, identified and delivered.
The tool looks at the answers given and rates the user organisation out of a maximum 50 points. This rating is checked against data held by PKF and the CCFS concerning more than 700 other organisations, and a relative percentile ranking is provided. The tool then calibrates the fraud resilience rating against the information held about the measured cost of fraud.
It is common sense that the better protected an organisation is, then the less it will lose to fraud; PKF and CCFS have gone beyond this general principle and can calibrate one against the other to provide an indicative figure for percentage losses.