Seasonality describes the recurring relationship between fluctuations in data and time. Any predictable pattern that repeats itself over a one-year period is said to be seasonal. Seasonality occurs commonly throughout a calendar year, for example, in climates whereby temperatures fluctuate with winter and summer seasons, heating costs often fluctuate in parallel. Similarly, in winter months a company selling sun tan lotion is likely to have lower sales compared with the summer months. So, the question is, is there an element of seasonality in the ORIC International dataset and if so, what are the key drivers influencing these?
The first step is to look at the occurrence month, i.e. the month in which a risk event materialised. According to the data, the most ‘perilous’ month for risk managers is January, with almost 13.5% of loss events occurring in this month, followed by December with 9.32% and June with 9.23%. In contrast, the ‘relatively safe’ months for risk managers are August with 6.14% of loss events occurring in this month followed by February and November with 6.88% and 7.09% respectively. January and December are the costliest months for firms, with losses occurring in these months to over 38% of the total gross loss across the year. In comparison, May and February are the least costly for firms with just 3.09% and 3.83% of total gross loss respectively occurring in these two months.
So, what could be driving these events? Whilst budgets amongst firms are typically approved in November, most departments will not receive these funds until January. What follows is a flurry of activity, including new projects, system implementations and an overhaul of new processes, procedures and products. It is therefore no surprise that this is a particularly fertile time for risk events to materialise. What follows in February is no surprise either, as incidents occur there is a need for teams to review and bolster controls to effectively mitigate and reduce the likelihood of future events.
We’ve also observed seasonal trends in the data on a more granular level, particularly around Theft & Fraud. Between the months of December and March, over 60% of Internal Fraud – Forgery & Impersonation risk events occur. By comparison just 13% of Internal Fraud – Forgery & Impersonation risk events occur during May and August. Previous studies have hypothesised that the holiday season including Christmas and Thanksgiving in the United States, drives fraud because of an increased financial pressure on perpetrators and an increased opportunity to commit fraud, particularly as workers take extended periods of vacation.
We’d love to get your feedback on this trend and welcome members to provide further insights and thoughts by contacting Ciaran.