Cost of Fraud in Times of
Recession and Digitalization

Cost of Fraud in Times of Recession and Digitalization

Currently, humanity is experiencing a period of significant change. We are at a turning point in history, one of great disruption. This implies that the way we do things is changing rapidly. These are the beginnings of a new industrial revolution, the fourth revolution, which we will call the Revolution 4.0.

The 4.0 revolution is the revolution of digitalization. This revolution is providing us with a multitude of technologies such as interconnectivity, data analytics and mining, automation and robotics, artificial intelligence, and more. This may sound very futuristic, but it is our reality, as these technologies are already a part of our daily lives. For example, we see this when we have virtual meetings at work or make decisions based on analytical graphs. It is important for us as individuals to have a clear understanding of this, so we can adapt to this new 4.0 ecosystem and help accelerate the digital transformation in our organizations.

Undoubtedly, the key factor in the acceleration of digitalization that we experienced in 2020 and 2021 is due to the COVID-19 pandemic. Saadia Zahidi, Managing Director of the World Economic Forum, explained, "COVID-19 has accelerated the arrival of the future of work." We can see this reflected in our daily professional lives as time goes on, where we use more digital tools to facilitate and automate our work.

In addition to digitalization, COVID-19 has left us with a global economic recession, which has particularly hit Latin America and Europe hard. This means that we are living in times where resources in organizations are scarce. This situation has resulted in the loss of millions of jobs and the closure of tens of thousands of companies worldwide. Many organizations are currently struggling to continue their operations despite the challenges of doing business in a pandemic-stricken ecosystem. Many advocate for operational optimization, a key point in these times to make the most of the limited resources available in organizations.

At this point, we realize that the cost of fraud can pose a significant risk to organizational survival. According to the 2020 Report to the Nations by the Association of Certified Fraud Examiners (ACFE), the cost of fraud represents 5% of organizations' revenues. This cost can be reflected in 10% to 25% of financial results for a period. In times of scarce resources, this can mean the following:

• Private Sector: Business continuity and job loss
• Public Sector: Deterioration of health and social programs, and consequently, lives.

Due to these two points, it is crucial for organizations to seek mitigating measures against fraud for corporate or institutional survival. As a disruption point in human history, this situation is becoming a great opportunity to transform our society into a more ethical, honest, and just place.

SHOGUN offers a completely digital ethical line that will help your organization mitigate the cost of fraud with cutting-edge technology.

Author: André Barrantes
CEO and founder of SHOGUN Monitor. He is an expert in digital training development and specialized technology in Operational Fraud Prevention and corruption, with clients in over 20 countries in America and Europe.