Soaring prices ramp up the risk of receivables fraud

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As businesses struggle from the impact of rampant inflation, how can the receivables sector protect itself from an inevitable surge in fraud? Andrea Tanner, Head of Customer Success at Lenvi, reports.


Perfect Conditions For Fraud

The mounting cost-of-living crisis is creating “perfect conditions” for a surge in receivables fraud. A recent report from the Chartered Institute of Internal Auditors demonstrates that the combination of economic meltdown, the fallout from the pandemic and the war in Ukraine has produced “the ideal environment for fraudulent activity”. And while that heightened risk relates to UK plc in general, it also reflects a raised threat in the receivables sector. The pressure to create a fake invoice can become intense. And while there may be an intention to pay it back, the situation can quickly spiral out of control as costs continue to soar.

Of course, the industry has been here before. During the global banking crisis of 2008, overall fraud levels surged by 16% (source: CIFAS), with inevitable consequences for the receivables sector. Many of today’s client managers may not have been in position during that crisis and so managing a portfolio during a sharp recession could prove a challenging experience, and one that contrasts sharply with the pandemic crisis, when government-backed loans reduced risk levels.


Training Is Key

As a result, we’ve seen several clients ramp up their training in this area, and draw on the experience of team members who gained additional insights into identifying fraud when working through previous recessions. Interest in this area has also been demonstrated by the two masterclasses we held on fraud this year, which more than 150 people took part in.


Using Technology To Guard Against Fraud

We also know from our research into Navigating 2022 And Beyond (our Receivables Finance Global Outlook) that there is unease among some in the receivables sector about the reliability of their safeguards against fraud. Indeed, our survey of business across various countries found that only 78% were ‘satisfied’ or ‘somewhat satisfied’ with their risk management procedures. Some of that concern was prompted by the increased risk of business failure following the withdrawal of the Government’s COVID-19 financial support. Fast forward a few months, and the business environment is even more challenging.

Another notable point from that survey was that more than 50% of respondents were aiming to digitise their onboarding process over the next two years. The creation of best-in-class technology to guard against receivables fraud is something that my colleagues have been pioneering for years and more than 90% of the UK industry now uses Lenvi Riskfactor.

However, reflecting the current economic climate, we’re seeing an increase in discussions with clients who want to ensure they’re making the most of the technology. We’re also talking to others in the sector who realise that their existing manual checks are far from adequate.

If you have concerns about how your organisation is going to cope with the growing threat of receivables fraud do get in touch. If anyone can help, we can!

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