The in-depth study was conducted in conjunction with the Department for Business, Innovation and Skills (BIS), and categorises small businesses by their vulnerability to fraud to determine how and why they become victims.
The research found a quarter of small and medium-sized enterprises (SMEs) surveyed had suffered at least one type of fraud or Internet crime in the past year. The results will now be used in developing targeted fraud prevention strategies to help businesses protect themselves and their profits and to trade online with confidence.
This research builds on work led by the National Fraud Authority (NFA) to introduce stronger anti-fraud controls for businesses and disrupt and punish fraudsters.
Conducted as part of the National Cyber Security Programme, the research recognises the importance of SMEs to the UK economy, and shows business that knowing how to use new technology and the Internet securely can help protect their revenues and drive growth.
Jeremy Browne, the newly-installed Home Office minister responsible for crime prevention, commented: “For too long online fraud has been seen as a victimless crime or simply a cost of doing business in an internet age. However, left unchecked it can cost people their livelihoods. That’s why we are determined to combat the fraudsters and scammers who damage British businesses and prey on vulnerable customers, pushing up costs for us all.”
The minister added: “Part of the solution lies in understanding the extent and nature of the problem. That’s why this research is so valuable as it will help the NFA advise business to strengthen responses to fraud and stop them becoming victims.”
Fraud awareness and prevention programmes
The NFA is a Home Office agency which works with the counter-fraud community to make fraud more difficult to commit in (and against) the UK.
Working with SMEs is just one part of a range of ongoing awareness and prevention activities aimed at multiple sectors under ‘Fighting Fraud Together’ – the national plan to reduce and combat fraud in the UK.
This latest research showed that almost two-thirds (63%) of SMEs that had experienced fraud were concerned about becoming a victim again, but many may also be underestimating the threat with one-in-ten failing to take any action after suffering an incident.
Other findings include:
– the experience of fraud being 11% higher for those trading online
– computer hacking being the most common crime type, with 23% of SMEs responding that they had experienced it at some point in their trading history followed by card not present fraud (19%) and employee fraud (18%)
– hacking also caused the greatest concern, with 55% of small businesses either very or quite concerned about it, followed by corporate identity fraud (43%)
– awareness alone does not provide enough protection for SMEs, as the majority of victims (55%) were aware of the fraud type before they suffered it
– around 12% of victims reported losing more than 1% of their turnover to fraud
– after suffering fraud, only just over half (53%) reported the fact
Six distinct SME segments defined
The NFA and BIS have used the findings of this research to identify six distinct SME segments defined by factors such as awareness of different fraud types, perception of (and actual) risk, business size and use of online trading.
The National Small Business Fraud Segmentation will help determine exactly how attitudes, behaviour and other business characteristics contribute to fraud and Internet crime risk. This segmentation will be used to develop activities targeting vulnerable small businesses to increase their capability to prevent fraud and enable them to fully exploit new technology to expand their business.
David Willetts, the minister for universities and science, said: “Small and medium-sized businesses are vital to the UK economy and we want to help them exploit new opportunities. That is why they are an important part of the Government’s National Cyber Security Strategy.”
The minister stated: “This research means we can target support at SMEs so they can fully reap the benefits of technology while minimising the threats, helping them grow faster and perform better.”
Action Fraud and Get Safe Online
There is already significant support available to small businesses suffering fraud or online crime. For those who want to use the Internet confidently, safely and securely the NFA runs Action Fraud, a national service for individuals and businesses to report fraud and Internet crime and obtain advice on how best to protect themselves.
Get Safe Online is a joint initiative between the Government, law enforcement agencies and leading businesses which provides computer users and small businesses with free, independent advice on using the Internet safely.
The National Small Business Fraud Segmentation
The National Small Business Fraud Segmentation is accessible via the Home Office
The research consisted of a qualitative stage and then a quantitative stage of 2,392 interviews with key SME decision makers. For the purposes of the research, an SME was defined as a business with up to and including 249 employees.
This latest study follows on from the success of the NFA’s National Fraud Segmentation of consumers, published in June 2011, which was used to inform the recent and successful The Devil’s in Your Details campaign. This awareness raising campaign consisted of online videos and a Facebook application targeted at two consumer groups to highlight the importance of protecting personal information.
Fraud prevention activity is overseen by the Fraud Prevention Awareness Steering Group, which is led by the NFA and comprises partners in Government, law enforcement and the private and voluntary sectors with responsibility for co-ordinating and maximising the impact of fraud prevention initiatives.
*Any small business concerned about, or suffering from, fraud or Internet crime should contact Action Fraud on 0300 123 2040
