• Fraud costs the UK economy billions every year.
• Cyber fraud, insider fraud, identity fraud, and insurance fraud are common types of fraud.
• An accountant can identify potential risk areas and advise on security measures to protect your business.
• Train your employees about fraud risks and double-check any claims received.
As a business owner or entrepreneur, you may have heard of fraud and its devastating impact on a company. Fraud is a deliberate deception to secure unlawful gain and can come in various forms. This can devastate any business, especially smaller ones struggling to get by.
Fraud in the UK
In the UK, fraud is a severe issue affecting businesses and the broader economy. Here’s the impact of fraud on businesses in the UK and provide you with steps to prevent and mitigate the risk of fraud.
Fraud costs businesses in the UK billions of pounds each year. According to research by the National Audit Office, fraud costs the UK economy around £193 billion annually. This equates to roughly 3.6% of the UK’s GDP. In addition to the direct financial loss, businesses face reputational damage and potential legal action. This can result in a loss of customer loyalty and trust and potentially a loss of business.
Common Types of Fraud
Fraud can come in many forms. Here are some of the common types of fraud in the UK:
Technology has made running a business easier and opened the door to cybercriminal activity. Hackers and cybercriminals can take data, install malware or cause other types of damage to a business’s technology infrastructure.
Phishing emails that bait people into entering their password or personal details, as well as ransomware that encrypts a business’s files until a payment is made, are used by fraudsters. To help prevent cyber fraud, ensure you have strong passwords, use antivirus software, back up your files regularly and educate your employees about safe online practices.
Not all fraudulent activities come from outside the business. Insider fraud is when an employee steals money, customer data, or other valuable assets from the company. It’s usually an employee in a position of trust, such as an accountant, bookkeeper, or CEO, who has access to sensitive data. To prevent insider fraud, implement background checks for potential employees, split duties among several employees to prevent one person from having too much control or access, and monitor employee behavior for any unusual activity.
Identity fraud is when someone pretends to be someone else to gain access to information, goods, or services. This can occur when an individual poses as an employee or business owner to gain access to sensitive information or accounts. To keep your business safe from identity fraud, verify the identity of anyone you work with before sharing sensitive business information, monitor your bank accounts for suspicious activity, and educate your employees on identifying identity fraud attempts.
Insurance fraud is when someone makes a false claim to an insurance company to receive entitlements, such as repairs or compensation. This can happen in many ways, from exaggerating the value of damaged property to making up false incidents.
To prevent insurance fraud, make sure you have good-quality security in place, use a digital communication platform to ensure claims come from the rightful claimants, and have a way of double-checking claims when they are received.
Keeping Your Business Safe From Fraud
Thankfully, there are steps you can take to protect your business from fraud. Here are ways to do that:
Hire an Accountant
An accountant can see the financial side of your business, identify any red flags, and spot potential risk areas. They can also advise on security measures to help protect your business from fraud. Ensure that you hire an experienced chartered accountant to check your numbers. They can advise on improving your internal financial controls and spot any potential fraud.
Train Your Employees
Educate your employees about fraud risks, what to look out for, and the steps they can take to protect your business from fraud. This should include information on cyber security, insider threats, and identity theft.
Carry Out Regular Checks
Carry out regular checks to make sure your business is secure. This includes monitoring employee behavior and accounts, verifying the identity of anyone you work with, and reviewing financial records for suspicious activity or discrepancies.
Fraud is a serious issue that can devastate businesses, so taking measures to protect your business is essential. By following the steps outlined here, you can reduce the risk of fraud and keep your business safe. This can make your business more successful in the long run.