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Protect your company from complacency

There is an accepted view that in times of recession, economic stress or social unrest the incidence of fraud increases. While there are varying opinions on whether we have passed the worst of the recent financial crisis, it is clear there has been a shift in management focus as a result.

The drive to make every penny count may, in many sectors, result in reductions in administrative staff and increased “efficiencies”, which can hinder best practice segregation of duties and other control environments. Teamed with an increased focus on profit margins and tough performance metrics for employees, who may themselves be feeling less well off, the environment for fraud remains toxic. A recent KPMG study – Global profiles of the fraudster – found that 70 per cent of frauds involved staff collusion, showing that even the most stringent fraud-risk controls may not be a match for current threat levels.

The implications of suffering a publicised fraud loss can be extensive; not just the immediate financial impact, but also the more wide-reaching effects on employee morale and even, potentially, on share price. As a result, fraud is often kept under a veil of secrecy and is heavily under-reported or its extent and nature is underappreciated by senior management. The consequence is a misconception about the extent of fraud and an underestimation of the need actively to develop controls and risk mitigation strategies.

Insurance policies targeting fraud exposures should be based on extensive and ongoing research into, and analysis of, fraud trends and horizon risks. As with any new business venture or move into uncharted territory, detailed due diligence and background research is essential. Failure properly to understand fraud risks can give rise to unnecessary exposures. The same can be said for designing and delivering robust and appropriate insurance and risk management solutions for companies’ fraud risks – research is key.

Insurance is a final and key piece in the puzzle. Although insurance is not a substitute for robust control mechanisms, in supporting risk controls and processes it can help mitigate the consequences when these controls fail or are compromised.

At Marsh we do more than deliver “off-the-shelf” insurance policies. We work with our clients to assess their exposures and design protocols to minimise threats. We aim to design appropriate insurance programmes based on detailed analysis, and to deliver solutions from selected insurers which fulfil coverage and pricing requirements.

The Marsh commercial crime insurance solution is borne out of extensive analysis of real claims, testing of insurance contracts and an understanding of our clients’ businesses, both now and as they develop in future.

For further details on Marsh’s commercial crime product, please contact

Dean White

+44 (0)20 7357 2205


Alexandra Chittock

+44 (0)20 7357 2291