For business executives across many industries and geographies, "big data" presents tremendous opportunities. For those charged with deterring, detecting and investigating misconduct, mining such data can be a particularly powerful tool to be utilized in their overall compliance and anti-fraud efforts.
So how are companies leveraging forensic data analytics (FDA) to mine big data?
To understand how companies in 11 major markets are deploying FDA tools, we surveyed 450 executives across these countries.
Our findings suggest that while companies may be doing some forms of FDA, many are missing important opportunities to leverage more sophisticated tools.
Big data has big potential
Current regulatory landscape creates further impetus for new approaches in FDA: 87% of our survey respondents agree that regulatory compliance requirements, including anti-corruption laws and recent enforcement trends, are a factor in the design and use of FDA. Indeed, nearly 50% indicate these regulatory compliance requirements are among the top five factors.
FDA efforts are aligned well with perceived company risk areas: The risk of bribery and corruption is identified as having the highest priority in an FDA program, with 65% of the respondents indicating that it is a concern. Fortunately, these risks are also well aligned with the use of analytics, as 74% of respondents indicate that they are using FDA to combat bribery and corruption.
In our survey research, 72% of respondents believe that emerging big data technologies can play a key role in fraud prevention and detection. Yet only 7% of respondents are aware of any specific big data technologies, and only 2% of respondents are actually using them.
For those survey respondents integrating more advanced FDA technologies — including big data processing capabilities, data visualization, statistical analysis or text mining — we see notable differences in FDA results and recoveries, among other observations.
Why use FDA: key benefits and adoption
FDA enhances the risk assessment process and improves fraud detection: The top benefits according to our respondents are the ability to “enhance our risk assessment process” (90%) and the ability to “detect potential misconduct that we couldn’t detect before” (89%). The vast majority of respondents also note the following benefits:
- Better comparison of data for improved fraud risk decision making (82%)
- Enhanced audit planning or investigative fieldwork (82%)
- Earlier detection of misconduct (82%)
Technology: the right tools for the right job
While spreadsheet and database applications are components of the overall FDA toolset, companies dealing with increasing data volumes, velocities and varieties of data require more sophisticated technologies. However, our survey research suggests that advanced FDA technologies are not being utilized by the vast majority of companies.
The biggest FDA challenges
Lack of awareness and expertise: While 69% of respondents suggest that their current anti-fraud and anti-bribery programs are effective, there is a notable need for increased anti-fraud/anti-bribery procedures, which include FDA.
Getting the right tools: Our respondents indicate that the single biggest challenge in their organization is “getting the right tools or expertise for FDA” (26%). With a wide disbursement of responses, other notable challenges include “analysis process quality improvement” (15%) and “challenges with combining multiple data sources” (15%).
Data volumes analyzed are relatively small: Our survey finds that 42% of companies with revenues from US$100 million to US$1 billion are working with data sets under 10,000 records. For companies with more than US$1 billion in sales, 71% report working with data sets of one million records or fewer. This raises the question that companies may be missing important fraud prevention and detection opportunities by not mining larger data sets.
Data sources analyzed are not aligned with technology: Our respondents report an extensive use of unstructured, free-text data sources in FDA, despite the general lack of text mining applications reported in the survey.
Right risks, wrong tools? There are notable differences between the FDA technologies that are the most effective and those that are being used. The survey demonstrates a wide disbursement of the tools in use, with no one FDA tool dominating the market.
Secure the buy-in, execute the build
Technology counts: better tools result in better FDA results
Respondents who are using FDA technologies beyond spreadsheets and databases have generally observed:
- Improved results and recoveries, 11% more than others
- Earlier detection of misconduct, 15% more than others
- More cost-effective results, 14% more than others
- Higher visibility to the board, 12% more than others
Five success factors for FDA integration
To build a successful FDA program, companies should consider the following five success factors:
- Focus on the low-hanging fruit: the priority of the initial project matters.
- Integrate more advanced FDA technologies.
- Communicate early and broadly.
- Sustained FDA success relies on the use of experienced, knowledgeable end-users interpreting the results.
- Enterprise-wide deployment takes time; don't expect overnight adoption.