Fraud costs food firms £12bn a year

Food and drinks firms could be losing out on £12bn to fraud

The food and drink industry could be losing up to £12bn a year to fraud, according to a new report published this week.

Research by business analyst Crowe Clark Whitehill and the University of Portsmouth’s Centre for Counter Fraud Strategies found that food and drink firms were not doing enough to reduce the cost of fraud to their businesses.

Fraud should be treated as a manageable business cost, according to the report – Minimising Fraud and Maximising Value in the UK Food and Drink Sector 2017.

Taking pre-emptive measures to reduce fraud could improve profitability of food and drink companies by 40% over 12 months, it claimed.

Head of forensic and counter-fraud services at Crowe Jim Gee said: “Our latest report shows that the sector could increase profitability by 43%, unlocking an additional £4.8bn.

‘Double their profits by reducing their fraud losses’

“Our experience is that the cost of fraud can be reduced by up to 40% within 12 months. Some of the FTSE listed food and drink businesses could double their profits by reducing their fraud losses.”

The report suggested seven steps to help prevent fraud before it happens. The first step suggests a firm should establish the nature and scale of the problem, analyse the financial cost of fraud to their organisation and the type of fraud affecting it.

Developing a counter-fraud strategy was the next step, as well as setting set up a monitoring and evaluation framework to establish the aims of the counter-fraud work.

The third step is to establish an implementation structure, which would require a centralised counter-fraud remit and authority and professional counter-fraud skills.

Step four is to design and implement fraud prevention measures, while step five is to design and implement detection measures. Step six is to implement investigative processes.

Performance managed

The final step of the plan is to monitor the outcome of the counter-fraud measures. According to the report, counter-fraud work should be performance managed like any other area of work.

“Fraud is the last great unmanaged business cost and reducing it offers forward-thinking businesses the opportunity to improve competitiveness and increase profitability,” added Gee.

“Shareholders and investors should be asking food and drink businesses about their cost of fraud and what is being done to manage and reduce the cost.  Businesses that cannot provide a response, or suggest that fraud is not an issue for them, should be a cause for concern.”

Meanwhile, up to 89% of global manufacturing businesses – including food and drink manufacturers – have been affected by fraud in the past 12 months, according to analyst Kroll.


Seven steps to protect against fraud
  1. Establish the nature and scale of the problem
  2. Develop a counter-fraud strategy
  3. Establish an implementation structure
  4. Design and implement fraud prevention measures
  5. Design and implement fraud detection measures
  6. Design and implement investigative processes
  7. Monitor outcomes

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