Investment pours into FDA across APAC

Forensic data analytics (FDA) is a growing investment priority for directors and executives across the Asia-Pacific region as the risks of cyber breaches coupled with increasing regulatory pressure rise.

Executives view cyber breaches, often intended to perpetrate fraud, and internal threats from malicious insiders stealing, manipulating or destroying data as some of the fastest-growing risks facing their businesses.

EY's 2016 Global Forensic Data Analytics Survey, Shifting into high gear: mitigating risks and demonstrating returns, shows Australian executives are among the most likely to report an increase in concern about cyber breach and insider threat risks, with 80 per cent saying their level of concern had either significantly or slightly increased.

While responses from China (including Hong Kong) and Singapore based executives were somewhat lower – coming in below the global average of 62 per cent – more than half still reported an increased levels of concern about these types of risks, at 55 per cent and 58 per cent respectively.

Source: Global Forensic Data Analytics Survey 2016, EY.

EVOLVING ISSUE

Attitudes towards FDA have evolved considerably over the past two years. In our 2014 survey, we found although organisations were deploying some form of FDA, many were missing opportunities to leverage emerging tools to strengthen and improve their risk management.

We are now seeing advanced data analytics becoming mainstream. New technologies and surveillance techniques are being developed amid growing awareness of FDA benefits at executive and board level.

It's no surprise three out of five survey respondents globally are planning to spend more on FDA in the next two years, particularly considering just 55 per cent say their current FDA spend is sufficient, a drop from 64 per cent in 2014.

Source: Global Forensic Data Analytics Survey 2016, EY.

When looking at the reasons for increased investment the survey found responding to growing cybercrime risks and increased regulatory scrutiny were the top drivers at 53 per cent and 43 per cent respectively.

How FDA tools are deployed is also changing. Organisations are taking a more front-foot stance, with 73 per cent of Singaporean, 58 per cent of Australian and 39 per cent of Chinese respondents saying they now invest at least half of their FDA budget on proactive monitoring activities.

Traditionally, organisations turned to advanced FDA tools to help with their reactive investigations. They are now beginning to recognise the indispensable role FDA can play in proactive surveillance, compliance, anti-fraud and corruption and cyber-breach mitigation efforts.

There are some obvious benefits to taking a proactive approach to FDA. The Association of Certified Fraud Examiners' most current Report to the Nations on Occupational Fraud and Abuse showed a 59.7 per cent lower cost per fraud incident for those organisations who were using proactive data analytics compared to those who weren't.

Surveillance monitoring programs utilising FDA can also help organisations strengthen their compliance programs by improving corporate culture and bolstering the confidence of regulators and other stakeholders.

COMMITMENT REQUIRED

While FDA is gaining traction and beginning to yield return on investment at many organisations across the region others are not reaping the full range of benefits it can offer.

Organisations need to commit and ensure FDA is incorporated as a critical component of their risk management and compliance programs, rather than investing in a piecemeal fashion.

By using current technology capabilities and leading analytics to help focus investigative and compliance monitoring efforts, FDA can be an important enabler of cost reduction in an organisation's anti-fraud and anti-bribery programs.

Yet only 20 per cent of Chinese and 15 per cent of Singaporean respondents are confident they are fully realising the value of FDA in reducing anti-fraud program costs. Even more staggeringly, none of the Australian respondents thought they were. There is clearly still a lot of work to be done here both locally and across the region.

One of the key challenges identified was making the business case for FDA investment. In fact, 80 per cent of respondents in China and 65 per cent in Australia and Singapore agreed there was a need to improve awareness of the benefits of FDA as part of a company's anti-fraud program.

Boards and senior-level management who see FDA's potential but have yet to come to terms with the investment required, need to understand the broad range of value effective deployment of sophisticated data analytics can deliver.

Once this is appreciated, the business case for FDA investment becomes clear and they can join those who are already changing the regime with an analytics revolution.

Rob Locke is EY's Fraud Investigation & Dispute Services (FIDS) Managing Partner for Oceania.

The views expressed in this article are the views of the author, not Ernst & Young.

The article provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.