4 whiteboard Winter 2016 talkingpoints. The move to a digital economy has seen a big increase in crime exposure for busi
talkingpoints
Mitigating cyber crime risks
MASTERCLASS
The rise of cyber crime
T
he move to a digital economy has seen a big increase in crime exposure for businesses, large and small. The internet has created a new wave of cyber crime, while at the same time making it easier for fraudsters to perpetrate more traditional forms of crime.
Is cyber crime a risk for SMEs? Mid-market companies are under immense pressure to tap into the online market, but it is proving very difficult to do so without increasing vulnerability to cyber crime. Many mid-market companies believe that they are too small to be targeted but, given their limited cyber security resources, SMEs are actually seen as a soft target by cyber criminals. Social media has been a major boon to fraudsters, who use public information to trick individuals into transferring large sums of money. Cyber criminals are also actively targeting mid-market businesses, stealing funds, intellectual property and personal data, as well as extortion.
How can companies mitigate the risk? Cyber crime is growing and it is very difficult, if not impossible, to protect against fully. However, there is a growing market for cyber advice and more companies 4 whiteboard Winter 2016
are turning to third-party consultants to carry out penetration testing and to help identify vulnerabilities. Crime insurance also has a role to play, especially for mid-market companies that have little appetite for such risk. While specialist cyber insurance is available, it tends to focus on third-party liability and the costs of dealing with a data breach. Crime insurance has evolved into a relatively broad form of cover and should respond to financial losses related to a dishonest employee or a third party, whether it is online or physical. However, not all crime policies are equal when it comes to cyber crime, and some will give much broader cover for online losses, like extortion, than others.
❛❛ Mid-market companies are seen as a soft target by cyber criminals.❜❜
Crime stats
55% Some 55 per cent of UK organisations have experienced economic crime in the past 24 months, up from 44 per cent in 2014, and more than the global average of 36 per cent.
44% Of course businesses that had suffered economic crime, 44 per cent were the victims of cyber crime. More than half (51 per cent) believed they would probably experience cyber crime in the next two years.
60% Some 60 per cent of economic fraud was perpetrated by outsiders and 31 per cent by staff. Seniority is no guard against crime – fraud perpetrated by senior management more than doubled to 18 per cent (36 per cent was perpetrated by middle management and 28 per cent junior staff). Source: PwC Global Economic Crime Survey 2016
Is traditional crime still a risk for business? Although somewhat overshadowed by the rise of cyber crime, traditional crime is still very much a risk for business. Incidents of physical crime have not reduced and can result in significant losses for a business – running into the many millions of pounds. Dishonest employees, motivated by greed or indebtedness, are the main cause. But significant losses also arise from fraud perpetrated by third parties, such as a misrepresentation of an investment or a business venture.
• Value of reported fraud in 2015 doubled to £1.5bn, an increase of 110 per cent from previous year. • The average value of fraud has risen 121 per cent to £2.9m with some cases brought to court reaching over £250m. • The most common in 2015 was third-party fraud perpetrated by suppliers and customers. Employee fraud was fifth, behind tax fraud, money laundering and mortgage fraud. Source: BDO Fraud Track report
