Nearly a third of North West firms experienced a fraud increase in 2020 as the pandemic has left businesses exposed
- 70% of mid-sized business owners in the North West think their company is more vulnerable to fraud since the emergence of COVID-19
- 29% of North West businesses have noticed an increase in cyber-attacks or attempted cyber-attacks since the onset of the pandemic
- Despite this, one in five businesses in the region do not have a fraud response plan in place
Seven in ten mid-sized businesses in the North West experienced fraud in 2020, with an average loss totalling £165,000, compared to a national average of £245,000, according to a new survey from accountancy and business advisory firm BDO LLP, which lays bare the extent to which COVID-19 has left firms exposed.
Nearly a third (29%) of businesses reported an increase in fraud in 2020 compared with the previous year; with a fifth of North West businesses (20%) having suffered security breaches through cyber-attacks since the onset of the coronavirus pandemic and associated lockdowns.
BDO’s Fraud Track survey monitored fraud trends at 500 mid-sized UK firms throughout 2020. In the North West, the research found that 43% of the frauds were externally generated, however a third (30%) involved collusion between internal and external individuals, while more than a quarter (27%) were committed against companies by their own employees.
The pandemic has exacerbated the risk of being targeted by fraudsters. Seventy per cent of North West business owners and directors think their company is more exposed to fraud since the emergence of COVID-19 – with 16% saying their exposure has “significantly” increased.
One of the main drivers of fraud risk since the first nationwide lockdown in March 2020 is home working, which has opened a gateway to new opportunities for data theft – including impersonation, or ‘spear phishing’, and sophisticated ‘whaling’ frauds aimed at senior executives. It has also added complexity to the process of identifying and defending against cyber-attacks: pre-pandemic, security was predominantly perimeter-based with firewalls separating the “outside” from the “inside”, but cloud services and remote working have blurred these lines.
Despite the rising number of frauds committed against mid-sized firms in 2020, BDO’s survey found that one in five North West companies do not have a fraud response plan in place, and more than half (64%) of business owners and directors in the region think resource constraints as a result of COVID-19 disruption will limit their investment in fraud detection and prevention tools over the coming year.
Commenting on the findings, Mark Underwood, director at BDO in the North West said: “The sudden shift to remote working brought about by COVID-19 has amplified cyber-security threats. Fraudsters are developing increasingly sophisticated tactics at an alarming rate, and the mass digitisation of the workplace has outpaced many firms’ ability to secure themselves against exploitation.
“It’s understandable that business leaders have been balancing the need to react to immediate operational concerns with forward planning and investment in fraud prevention and detection tools. The way business owners and directors act now will be critical in defining to what extent the pandemic facilitates a drain of IP and competitiveness. Our research shows that risk has increased and reported fraud is high and business leaders need to tackle this head on to protect the value in their business. Combatting the digital crime wave requires responsible investment to support long-term business resilience.”
This was posted in Bdaily's Members' News section by Emma McCallum .