Aerospace & Defense sector well positioned to tackle cyber crimes

August 3, 2018

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By Scott Thompson and Todd Ranta

As you may expect, the aerospace & defense (A&D) industry is ahead of other sectors related to its awareness of the complicated nuances of fraud and is taking more aggressively steps to address their concerns. This realization is putting A&D ahead of the pack when it comes to having a cyber security program in place and operational to combat potential economic crime and fraud. That’s according to more than 50 global A&D respondents who participated in PwC’s 2018 Global Economic Crime and Fraud Survey.

The complete survey was based on data from more than 7,000 respondents across 123 territories. Key takeaways pertaining to the aerospace and defense sector:

  • Fraud and economic crime experienced: Less than 40% of A&D respondents experienced economic crime in the past two years vs. 49% of global organizations
    • 35% of A&D companies were targeted by malware, 28% by phishing and 12% by the middle man
  • Most likely disruptive fraud and economic crime: 38% of A&D respondents categorized cybercrime to be the most disruptive and serious type of crime in the next two years compared to 26% of global organizations
    • Bribery ranked #2 followed by procurement fraud
  • Cyber security status: 70% of A&D sector respondents said their cyber security programs are fully in operation vs. 59% of global organizations
  • Monitoring fraud and economic crime: 40% of A&D respondents are using technology to primarily monitor cyber-attacks and vulnerabilities
  • Risk assessments performed: Half of A&D companies performed a general fraud risk assessment in the last 24 months
    • 46% performed risk assessments targeting cyber-attack vulnerability on par with global organizations
    • 44% performed risk assessments targeting anti-bribery and corruption vs. 33% of global businesses
    • 46% of A&D companies performed a cyber response plan assessment compared to 30% of global companies

Here are four steps that companies can take to fight fraud:

  1. Recognize fraud when you see it – There is an increase in awareness of fraud as more companies understand what “fraud” actually means. But every organization, no matter how vigilant, is still vulnerable to blind spots, and because they only become apparent with hindsight, it’s important to shed light on them as early as possible to enhance fraud fighting efforts.
  2. Take a dynamic approach – The C-suite can no longer claim ignorance as an excuse when the financial costs of fraud impact their business. Today’s enterprises are increasingly embedding their newly reinforced fraud prevention measures into their first line of defense. This is an important development, and the more a company learns to react to micro-disruptions effectively, the better prepared it is for responding to mega-crises.
  3. Harness the protective power of technology – As companies recognize fraud as first and foremost a business problem, many have made a strategic shift in their approach to technology, making a business case for robust new investments in areas such as detection, authentication and the reduction of customer friction. However, technology is expensive to buy and to adopt across a large organization, so it’s critical to think through which emerging/disruptive technologies will work best for an organization.
  4. Invest in people, not just machines –Technology is clearly a vital tool to fight against fraud, but it can only ever be part of the solution, particularly when it comes to combatting internal fraud. The three principle drivers of internal fraud, or the “fraud triangle,” are incentive, followed by opportunity, and then internal rationalization. Since all three of these drivers must be present for an act of fraud to occur, each of them should be addressed individually. By establishing a culture of honesty and openness from the top down, they can instill open accountability with employees and prevent fraud.

For more information, visit PwC’s 2018 Global Economic Crime & Fraud Survey for the aerospace and defense sector.

©2018 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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