Economic crime in the chemicals sector: How the industry’s risk assessment measures up

October 2, 2018

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By Kazi Islam  and Todd Ranta

How well positioned is the chemicals sector to deal with threats of economic and cybercrime? According to the recently published findings of PwC’s 2018 Global Economic Crime Survey, chemical companies are largely in lockstep with other industries when it comes to guarding themselves and utilizing risk assessments to protect their businesses. Examining the survey’s full results, we can see both areas in which the chemicals sector is excelling as well as the areas in which it can improve compared to global, cross-industry averages.

The complete survey was based on data from more than 7,000 respondents across 123 territories. Here are the key takeaways from the 111 respondents across the chemicals sector, most of which are in line with the results from the full global survey:

49% of chemical respondents were affected by economic crime in the previous two years, identical to 49% of all companies.

29% of chemical companies anticipate cybercrime to be the most serious threat they face in the next two years while 15% said procurement fraud.

In the last two years, 40% of chemical companies have been targeted by phishing, 38% by malware and 12% by man in the middle attacks.

59% of chemical respondents have a fully operational cyber security program in place to deal with these threats, on par with the same percentage of all global respondents.

48% of chemical organizations have performed a general fraud risk assessment in the previous two years compared to 54% of all global firms.

  • A lower percentage of chemical respondents, 40%, targeted cyber-attack vulnerability in their assessments over the last 24 months vs. 46% of global businesses.
  • 20% of chemical companies performed an assessment of their cyber response plan compared to 30% of all 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 effectively react to micro-disruptions, 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 challenging 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 principal 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, companies can instill open accountability with employees and prevent fraud.

For more information, visit PwC’s 2018 Global Economic Crime & Fraud Survey for the chemicals 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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