The data coming out of the Covid-19 pandemic has shown significant changes in invoice payment behaviour. Companies of all sizes, and from various industry sectors, are slowing down payments and holding on to cash for longer. The uncertainty about the future means they are being much more cautious and looking to manage their risk and cash-flow as closely as possible to protect themselves as we move deeper into recession.

Economic outlook

As if Covid-19 was not bad enough, we now have the spectre of a no-deal Brexit looming closer by the day. Whether you believe that they’ll finally get a deal done or not, it inevitably leads to even greater levels of uncertainty.

Early in December, the OECD downgraded its outlook for the UK economy amid surging coronavirus cases and has warned of a hit from a no-deal Brexit:

“Brexit would entail physical and financial disruptions of different magnitudes across sectors, with exports falling by more than 30% in a few manufacturing sectors (notably the motor vehicle and transport, meat and textile sectors) and by almost 20% in the financial and insurance sector.”

Effects on behaviour

History tells us that not only do these uncertain times damage companies’ performance but they also lead to significantly increased risk of fraud, as stress in the economy changes people’s behaviour. This month, Global Banking and Finance Review wrote about the increased risk of fraud and described the ‘Fraud Triangle’. The Fraud Triangle is a framework explaining the factors that cause someone to commit fraud:

  • The first factor is pressure. This is the risk that is most likely to cause Directors, CEOs, CFOs or mid-management employees to cross the line. An increase in pressure in any organisation contributes to a heightened fraud risk. Companies are facing liquidity challenges, leading to missed obligations such as rent or loan repayments, and many are having to consider alternative sources of finance. In addition, there are the less tangible pressures such as reduced morale and the challenges of keeping teams running from people’s homes.
  • The next factor is opportunity. Working from home and having a reduced workforce in the traditional place of work presents a considerable opportunity for fraud. Many of the controls and mitigating processes are severely compromised, and therefore present individuals with an opportunity to commit fraudulent acts.
  • The final factor in the fraud triangle is rationalisation. It is possible in the COVID-19 context, with large numbers of employees being made redundant or furloughed, that some individuals may rationalize committing fraud. They may believe they are in some way helping the business in the short term, or gaining a personal advantage, by looking for ways to benefit from a fraudulent act.

The need for improved controls

In these turbulent times, keeping control of a working capital finance programme is more critical than ever. As we learn more about the Brexit deal, or lack of one, the behaviour of decision makers will undoubtably change. The uncertainty in the market place and changes in payment patterns represents a huge risk to potential funders.

The application of technology to give funders and insurers up-to-the-minute visibility of the changes in risk and performance of funded portfolios can no longer be put off. In 2021 ability to quickly identify changes in portfolio’s performance will be vital. Those relying on periodic updates from a manual source and spreadsheets will find they are unable to react quickly enough to the issues that organisations will face. There may be huge changes in payment performance between one report and the next. This poses a material risk to the programmes as well as being very poor at spotting potential fraud.


Our technology protects our partners in both settled and turbulent times. We provide the support and visibility to enable you to keep lending, to protect your portfolios and minimise the risk of fraud. For more information please contact us.

You can read more about fraud risk in our article The Invisible Fraud In Working Capital Finance.

You can learn more about how we help organisations increase portfolio performance in our article Increasing The Profitability Of Working Capital Programmes.

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