- 72 percent of respondents say emerging big data technologies can play a key role in fraud prevention and detection
- 90 percent say forensic data analytics will enhance the risk assessment process, with 82 percent contending that its use will lead to the earlier detection of misconduct
- Yet only 2 percent are leveraging big data technologies and only 11 percent are using statistical analysis and data-mining tools
LONDON, 19 March 2014 – EY’s 2014 global forensic data analytics survey, Big risks require big data thinking, highlights that 63 percent of senior executives surveyed at leading companies around the world agree that they need to do more to improve their anti-fraud and anti-bribery procedures, including the use of forensic data analytics. The survey polled more than 450 executives in 11 countries, including finance professionals, heads of internal audit, compliance and legal, about their use of forensic data analytics in anti-fraud and anti-bribery compliance programs.
The survey also finds that 87 percent of respondents indicate that regulatory requirements, including anti-corruption laws and recent enforcement trends, are a driving force behind the design and use of forensic data analytics, with almost half indicating that these regulatory developments are a top-five factor. Bribery and corruption is reported as the top perceived risk at 65 percent, which aligns well with the finding that 74 percent report using forensic data analytics to combat bribery and corruption. Other perceived significant fraud risk areas, such as asset misappropriation and financial misstatement, are also priority areas for forensic data analytics attention.
David Stulb, EY’s Global Leader of Fraud Investigation & Dispute Services (FIDS), says: “With regulators and law enforcement agencies intensifying their cross-border cooperation, resulting in significant corporate fines and jail sentences for executives, boards should encourage management to leverage forensic data analytics in their ongoing compliance efforts.”
Forensic data analytics enhances the risk assessment process and improves fraud detection
A key benefit of forensic data analytics, according to 89 percent of respondents, is the ability to “detect potential misconduct that we couldn’t detect before.” The sentiment is shared by many respondents, regardless of their function in the organization.
David Remnitz, FIDS Global Forensic Technology & Discovery Services Leader, remarks: “Our survey findings suggest that while companies may be doing some forms of forensic data analytics, many could be missing important opportunities to improve their anti-fraud and anti-bribery efforts. By combining multiple data sources and leveraging advanced forensic data analytics tools, companies are now able to gain new and important insights from their business data.”
Missed opportunities to turn data into information
Despite the overall positive sentiment regarding the effectiveness of forensic data analytics, the research suggests that the vast majority of companies are not working with sufficient data volumes given the size of their corporate revenues.
Only 18 percent of internal audit professionals polled are working with data volumes in excess of 1 million records. Among financial services respondents, only 21 percent report working with data volumes nearing and over 1 million records, which is still low for such a data-intensive industry. Overall, 71 percent of companies with more than US$1 billion in revenues are working with data sets under 1 million records. The use of smaller-than-expected data volumes, relative to corporate revenues, raises the question that many companies may be missing important fraud prevention and detection opportunities by not mining larger data sets.
Advanced forensic data analytics tools like statistical analysis and data-mining technologies are used by only 11 percent of respondents. It is not surprising that the biggest challenge with respect to forensic data analytics is “getting the right tools or expertise.” Building support within the company for more intensive forensic data analytics efforts appears to be a key priority for our respondents, with 62 percent of those polled indicating the need to improve management’s awareness of the benefits of forensic data analytics. Interestingly, cost does not appear to be a major obstacle, with just 10 percent of interviewees indicating that forensic data analytics is prohibitively expensive.
Bigger data, better insights
Traditional spreadsheet and database applications can struggle with the increasing volumes, velocities and varieties of data generated by global companies. Advanced forensic data analytics technologies including statistical tools that incorporate predictive modeling, anomaly detection and risk-scoring algorithms, can mine such big data to detect potentially fraudulent transactions in real, or near-real, time. The effective use of natural language processing, or text-mining, combined with data visualization, can handle a wide variety of sources, including both structured and unstructured data, to improve overall detection, reduce risk and increase return on the investment in forensic data analytics.
Respondents who are using forensic data analytics technologies beyond spreadsheet and database tools have generally observed earlier detection of misconduct (15 percent more than others) and improved results and recoveries (11 percent more than others), among other positive differences.
David Remnitz concludes: “Given that their companies are likely generating substantial data volumes, it would be prudent for Board members and other stakeholders to encourage management to accelerate their efforts to glean as much insight as possible from their big data. Better risk assessments and more effective compliance, among other benefits, are likely to follow.”