In addition to a rapidly evolving economic crime threat landscape, businesses face new pressures from customers and stakeholders to honour values such as integrity and trust. The public’s expectations for a business to uphold these values are strong enough that should a business fall victim to an incident of economic crime severe enough to break this trust, the consequences extend beyond minor financial losses. Today, damage to reputation and market share can become an existential issue.
A Focus on Security, Trust and Accountability – Changing Public Demands and Expectations
Recent years have seen an evolution of the threats facing businesses. The nature of economic crime has changed immensely over the course of only several years, which has catalyzed an evolving set of compliance and regulatory obligations.
Notably, however, as the economic crime threat landscape has evolved, so too have the expectations that customers and stakeholders have of businesses. In their Global Economic Crime and Fraud Survey, PwC explains how…
“A pronounced shift in the way the world looks at fraud and corruption has taken place over the past few years. And our survey data reflects this now deep-seated demand for accountability, from both the public and from regulators, across the private and public sectors. This is not a phenomenon limited to developed markets, either. Across vastly different cultures, in every region of the world, there are signs of convergence around standards of transparency and expectations of conduct.” – PwC.
The growing demand for accountability and corporate integrity has become paired with a greater emphasis on the value of trust. In a survey by Deloitte, 81% of respondents said that human values such as ethics and integrity – reflected in a company’s conduct – are important for building trust. Consumers also relate to the value of trust, even in a corporate setting, in a human way, describing the loss of trust in terms such as betrayal, disappointment and anger. The risk of losing this trust has become a threat that businesses cannot afford to overlook.
The Consequences of Broken Trust – An Existential Issue?
The heightened global emphasis on corporate trust and accountability has a flipside. If a business breaches the trust that its customers and stakeholders have placed in it – such as when a business falls victim to a serious incident of economic crime or data breach – the consequences can be devastating.
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In the aftermath of a major incident of economic crime and loss of trust, the consequences can be more than just financial – they can be existential.
To study the financial impact of damage to trust, Deloitte looked at three different companies that had been embroiled in scandals, all of whom had a market cap of over $10 billion. The scale and scope of all three scandals were trust-related and all led to regulatory or government intervention.
Over the course of their respective scandals, the three companies lost between 20-56% of their market cap over a period of between three months and two years. The combined total value of this loss was approximately $70 billion. The value they lost in relation to their peers was even more severe, with the three companies falling behind their respective industry indexes by 26-74%.
These case studies represent how consumer demand for greater security, corporate accountability, and trust has the potential to shape the fortunes of a company. If consumers and stakeholders feel that a business breaches these values, they are willing to terminate their relationship with the business. In a survey by Deloitte, 85% of respondents were very or fairly likely to sever an existing relationship with an organization if it did something that negatively impacted trust.
“The existence of social media platforms that facilitate the extremely rapid spread of information (both real and fake) means that the publicity from an incident may often prove uncontrollable, even with the swiftest responses. Preventing these incidents from ever happening in the first place is increasingly becoming the only way forward.” – PwC.
Purely from the perspective of trust, the consequences of a significant incident of economic crime are too severe for many businesses to risk enduring. Consequently, a proactive approach to guarding against economic crime is necessary to secure business relationships and maintain the trust that customers and stakeholders vest in a business.
KYC and Due Diligence Protocols – How to Guard Against Economic Crime to Ensure Trust
The changing threat landscape of economic crime is presenting businesses with new challenges, while evolving consumer expectations for company conduct are holding businesses to increasingly higher standards.
Although daunting, the threat posed by external perpetrators of economic crime can be addressed. While other types of economic crime such as bribery and corruption are far harder to tackle, external threats such as customer fraud is one where “dedicated resources, robust processes and technology have proven effective in prevention”.
As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can protect your business while providing a world-class customer experience, book a demonstration by contacting our team here.
Citations
- PwC. Global Economic Crime and Fraud Survey. 2021.
- PwC. Global Economic Crime and Fraud Survey. 2020.
- PwC. Global Economic Crime and Fraud Survey. 2020.
