The rising cost of investigations and heightened fraud risk hit businesses hard, Kroll survey reveals
- Over four in five (82%) respondents said their organizations had been significantly impacted by fraud and illicit activity
- Seventy-eight percent of respondents’ organizations had conducted investigations into fraud, corruption or related misconduct in the past three years
- Four in five (79%) respondents said the cost of these investigations had increased, particularly for organizations with a turnover of more than $15 billion
Kroll, the leading provider of data, technology and insights related to risk, governance and growth has revealed the results of its latest Global Fraud and Risk Report, showing that organizations around the world are dealing with the rising costs associated with investigating allegations of serious misconduct.
The report, based on a survey of over 1,330 senior decision-makers for risk strategy, including CEOs, general counsels, chief compliance officers and chief financial officers, reveals that the vast majority (82%) of respondents said their organizations had been significantly impacted by fraud, corruption, illicit activity, money laundering or other serious misconduct.
In response to the high reported rates of serious misconduct, more than three-quarters (78%) of surveyed organizations stated they had conducted internal investigations over the past three years.
The sectors reporting the highest impact from fraud, corruption and illicit activity were:
| Sector | Significantly impacted by serious misconduct | Conducted an internal investigation in the last three years |
| 1. Transport, leisure and tourism | 90% | 65% |
| 2. Banks | 89% | 84% |
| 3. Technology, media and telecommunications | 88% | 82% |
| 4. Life sciences | 83% | 83% |
| 5. Retail, wholesale and distribution | 81% | 69% |
Interestingly, while the majority (90%) of respondents in the transport, leisure and tourism sector reported their organization had been significantly impacted by serious misconduct, only 65% of organizations in this sector had conducted an internal investigation in the last three years. Of all sectors surveyed, only the extractives sector reported a lower incidence of internal investigations (64%), with 75% of respondents reporting significant impacts from serious misconduct.
The sectors most likely to have conducted an internal investigation were:
| Sector | Conducted an internal investigation in the last three years | Significantly impacted by serious misconduct |
| 1. Banks | 84% | 89% |
| 2. Life sciences | 83% | 83% |
| 3. Technology, media and telecommunications | 82% | 88% |
| 4. Manufacturing | 82% | 78% |
| 5. Consumer goods | 74% | 74% |
Almost all organizations (98%) that had conducted an internal investigation recruited the help of external firms to assist, with the most called-upon advisors being computer forensics/eDiscovery firms (55%), followed by investigations firms (47%).
Despite advancements in technology and data analytics, nearly four in five (79%) respondents said the cost of investigations had increased over the past three years. Organizations with the highest turnover found themselves the most susceptible to rising costs, perhaps partly due to the growing complexity of global operations. Nearly half (49%) of organizations surveyed with a turnover of more than $15 billion (bn) felt the cost of internal investigations had “increased significantly,” almost double that of the global average (26%).
Kroll’s research also shows the extent to which organizations believe that some firms offering investigative services are failing to deliver true value. Document review and eDiscovery services were identified as being the most expensive relative to their value by 29% of respondents, followed closely by computer forensics (24%).
This suggests that some external providers are not leveraging the most up-to-date tools and technology to efficiently find relevant information – the “smoking gun” email or transaction or significant anomalies – in massive volumes of structured and unstructured data.
Andy Gandhi, managing director and global leader, data insights and forensics, Kroll, said: “The exponential growth of electronic information within organizations means that when an internal investigation kicks in, finding facts across large, disparate data sets can be a monumental task, causing inefficiencies and delays. This can be solved by developing an understanding of the key data within the organization, designing a robust data governance framework to proactively classify and index data, and applying technologies such as artificial intelligence and machine learning to enhance processes. The data and insights can then be used to make strategic decisions and respond to regulatory requirements. The downstream investigation process also becomes far more efficient, saving time and cost.”