IT spend rises to fight fraud

Firms have prioritised encryption tools to combat increasing levels of information theft.

As the cost of fraud to businesses spiralled by 22 per cent this year, spending on IT security was companies’ top preventative measure, according to research.

The Economist Intelligence Unit was commissioned by risk consultancy Kroll to carry out The Global Fraud Report, which covered 900 global companies from 10 industries. Over the past three years, fraud has cost businesses an average of $8.2m (£4.6m), a rise of 22 per cent on last year.

The proportion of companies suffering at least one instance of fraud also rose from 80 to 85 per cent. The most widespread form of fraud was theft of physical assets, suffered by 37 per cent of firms. Information theft, loss or attack afflicted 27 per cent of firms, a five per cent increase on last year.

In his introduction to the report, Kroll chief executive Ben Allen said: “Financial fraud is a critical problem for many companies, but the report shows there is more to fraud than this. Information theft and threats to intellectual property are rising fast up the list of concerns.”

In the technology, media and telecoms sector the average loss was $5.6m, only two-thirds of the overall average. A total of 79 per cent of companies in the space have suffered fraud during the past three years compared with 85 per cent overall.

However, the sector was the hardest hit by information theft, loss or attack with a third of businesses affected. A further 41 per cent of firms feel highly vulnerable to these threats, while a third consider themselves moderately vulnerable.

Paul Prior, managing director of security VAR Foursys, said end users are increasingly interested in data encryption tools. “Financial fraud is one aspect, but a bigger aspect is confidential information and data leakage,” he said. “There are a lot of solutions out there for malware prevention, now customers have a bigger driver on their hands.”

Increased spending on IT security is seen as the top fraud prevention measure. Six of the ten industries tracked in the report earmarked it as their biggest investment focus for preventing fraud.

The percentage of firms investing in IT security topped 50 per cent in nine industries.

David Hobson, managing director of security reseller GSS, said: “We see fraud prevention as an area that going to grow and there will be issues around data leakage. Whenever people are worse off they have more opportunities and more desire to commit fraud.”