Insights & Reports > Kroll Global Fraud Report

European companies are confident about their exposure to fraud, having invested widely in anti-fraud measures.

• For every fraud covered in the survey, fewer Europeans consider themselves highly vulnerable than the overall average. In two cases – information theft (16% describe themselves this way) and management conflict of interest (6%) – these are the lowest figures for any region.
• Europe also has the highest proportion of companies that believe their exposure to fraud has not increased (30%).
• This confidence may come from widespread use of anti-fraud measures. Of the ten strategies listed in the survey, nine were more common in Europe than average – the only exception was staff background screening, which just 32% have in place. Six of these measures – IT security (83%), physical asset security (78%), management controls (72%), reputation protection (48%), risk management systems (47%) and IP monitoring (43%) – were more common in Europe than anywhere else.
• The decrease in financial loss from fraud does not necessarily translate to there being a decreased threat; one might argue that companies have responded to these very real threats and are investing in processes and actions needed to address the causes.

The results of these anti-fraud efforts, however, are middling, and in some cases confidence in them may be misplaced.

• Despite its widespread use of anti-fraud strategies, the proportion of European companies hit by nine out of ten of the frauds covered in the survey is within three percentage points of the survey average, and in five cases the difference is under 1%.
• Regulatory or compliance breaches constitute the only fraud to vary significantly from the norm, but here Europe has a higher proportion of firms that have suffered in the last three years (25%) than any other region.
• Nor has there been much change from last year. The average loss over the last three years, $7.7 million, is slightly down from the 2008 figure, but the number of companies suffering from at least one fraud rose to 89%, again the highest in any region. Meanwhile, six of the frauds in the survey saw an increase in incidence from the 2008 figures, and four a decrease. Once more, the changes were small.

European confidence in corporate antifraud efforts might leave it ill prepared to face new challenges.

• To cite one example, the region has a higher than average rate of management conflict of interest in the last three years (25%), but the lowest number of companies calling themselves highly vulnerable (6%), as well as the fewest spending on further management controls in the coming year (25%).
• More broadly, over the next year, fewer companies in the region will invest in every anti-fraud strategy covered in the survey than the global average. In five cases, spending will be less widespread here than anywhere else.
• Meanwhile, the other issues are making life harder. The continent had the highest proportion of respondents indicating that entry into new markets had increased vulnerability (28%), and that reduced revenues had done the same (16%).
• The decrease in fraud does not necessarily translate to there being a decreased threat, but more that there is more investment in battling the causes. Companies have responded to the very real threats and are investing in processes and actions needed to address.
• While the results might suggest that European companies are relatively content with their fraud measures, Kroll's experience suggests that however effective the controls, they can be circumnavigated by collusion and organized fraud. Rarely do we see major frauds identified by prevention controls; they are usually uncovered by accident, by whistleblowers and often when it is too late. The findings might indicate that corporates are lulling themselves into a false sense of security with compliance procedures and relying on regulations to capture misconduct.

European companies have certainly taken measures against fraud, but the results are less than they might be entitled to expect.

Spotlight on United Kingdom

This year the United Kingdom saw less of most kinds of fraud. Fewer British firms than the European average suffered from eight out of ten of the frauds covered in the survey. For the two exceptions, theft of physical assets and internal financial fraud, the differences were small. Moreover, the average loss per company, $3.8 million was about half the European average. On the other hand, the problem was more spread out, with 90% of British companies experiencing some type of fraud in the last year, slightly more than for the region as a whole.