Organisations often don’t grasp the true financial impact of an economic crime until after it has happened — sometimes well after. As in previous years, The Global Economic Crime Survey underscores that the cost of fraud — both in financial and non-financial terms — is significant.
Nearly one in five (18%) organisations suffering fraud experienced a financial impact of between US$1 million and US$100 million. And the percentage of respondents reporting losses in excess of US$100 doubled, from one to two percent.
These large losses may be connected to the reported increase in incidents of bribery and corruption — frauds which can be especially costly to organisations, with regulatory fines, legal fees and remedial expenses easily reaching billions of dollars.
But economic loss is not the only concern that companies face when combating fraud. Survey respondents pointed at damage to employee morale, corporate and brand reputation, and business relations as some of the most severe non-financial impacts of economic crime.
When taking into account the secondary damage, the true cost of an incidence of economic crime can be long lasting. Consider the long chain of adverse events can follow a single, high-profile incident of economic crime:
- lost revenues, as customers look for other business partners;
- delayed entry to new markets due to regulatory issues;
- a battered stock price; and
- declining productivity and morale.
Fortunately, top management appear to understand the importance of collateral impacts: the 2014 Global CEO Survey reports that half of chief executives (a sharp increase from 37% just a year ago) see a “lack of trust in business” as a key marketplace issue, with significant majorities recognizing that business has a wider role to play in society than just building shareholder value.