Guest Blog Post
by Erik Bratt
Originally Published October 31, 2017
For treasurers around the world, there’s plenty to be concerned about. Here are nine stats that are likely to strike fear in the heart of every treasurer.
Percentage of U.S. Financial Professionals That Were Victims of Payments Fraud in 2016
According to the 2017 AFP Payments Fraud and Control Survey, a whopping 74 percent of respondents experienced attempted or actual payments fraud last year. This was the highest level recorded by the survey in the last decade and much higher than the 62 percent recorded in 2014. The problem is particularly severe for large corporates, where 84 percent of those with at least $1 billion in revenue have been the victim of fraud.
Amount stolen from Xoom in 2014
Money transfer company Xoom’s worst fears came true a couple of years ago when the company was hit by a $31M international scam. The fraudulent attack targeted the company’s finance department via employee impersonation, with the massive sum being transferred to overseas accounts, according to reports. In a statement, the company’s chief executive noted that the fraud “was sophisticated enough to overcome numerous internal protections.” The company was subsequently acquired by PayPal the following year – but not before the CFO had resigned.
% of Executives Who Say Their Finance Teams Have Strong Fraud Detection Processes
Companies need to have strong processes and technologies in place for detecting fraud and ensuring fraud-related compliance. But only one in 10 financial executives strongly believe that most teams in their industry have achieved this, according to a study published earlier this year by CFO Research, in collaboration with Kyriba. Respondents identified technology as the biggest challenge in combatting payments fraud, followed by budget and time.
Additional Reading: 5 Key CFO Challenges for Addressing Payments Fraud
The Average Length it Takes for an Organization to Discover Fraud has Occurred
The sooner a fraud scheme is detected, the smaller any financial loss is likely to be. But some fraud activities are not discovered for months, or even years. The Association of Certified Fraud Examiners (ACFE) 2014 Global Fraud Study found that the median time from when a fraud commenced to when it was detected, is 18 months. And a fifth of the cases included in the report were not discovered for more than three years.
The Amount Lost by 22% of Companies Affected by Fraud
The ACFE study also reported that the median loss caused by fraud was $145,000, with half of the cases covered by the research losing less than $200,000. But in many cases, the cost of fraud is much greater than this. According to the research, over a fifth of the cases involved the loss of at least $1 million. Likewise, the largest loss reported in the 2016 Kyriba/ACT survey was $2.5 million from a single incidence.
Beyond fraud: While these figures are frightening, treasurers have more to worry about than the risk of fraud. Also concerning are the dangers present in everything from Brexit to inaccurate cash flow forecasting:
% of CFOs Who Think the Business Environment Will be Worse After Brexit
With less than 18 months to go before the UK leaves the EU, the implications are still uncertain. Many issues are yet to be decided, from trade plans to the rights of EU citizens already in the UK. And CFOs continue to worry about the longer-term impact: Deloitte’s Q3 2017 survey of UK CFOs found that 60 percent believe the overall environment for business will be adversely affected by the UK’s exit from the EU. Meanwhile, just under a third expect to reduce investment over the next three years as a result of Brexit.
% of Treasurers Who Are Not Actively Monitoring Risks Using ‘At Risk’ Measures
Deloitte’s Global Corporate Treasury Survey 2017 found that FX volatility was the biggest challenge faced by treasurers – hardly surprising in light of Brexit and other political turmoil. Yet, the report also found that treasurers’ analytical capabilities are lagging behind. Three quarters are not actively monitoring risk using ‘at risk’ measures such as VaR (value at risk), CFaR (cash flow at risk) and EaR (earnings at risk). And less than half are using sensitivity analysis to monitor individual risk factors such as FX and interest rate risk.
Percentage of Treasurers Who Update
Their Cash Flow Forecasts Monthly
Cash flow forecasting continues to be a challenge for treasurers, with many companies struggling to predict their future flows accurately. Eighty percent of respondents to PwC’s 2017 Global Treasury Benchmark Survey ranked forecasting as being of high or critical importance. However, the survey found that over half only update their cash forecasts on a monthly basis, while 23 percent did so quarterly. Challenges cited by treasurers included the accuracy of data collected, as well as their ability to collect forecast input on time.
Percentage of Spreadsheets
That Contain Errors
Last but not least, spreadsheets continue to represent a very real threat for treasurers everywhere. Research carried out a few years ago by Ray Panko, a professor of IT management at the University of Hawaii, found that 88 percent of spreadsheets contain errors. Panko analysed a number of different studies and concluded that spreadsheets contain errors in 1 percent or more of all formula cells. Consequently, “for large spreadsheets, the issue is how many errors there are, not whether an error exists.” Terrifying.