'Nearly three quarters of European firms affected by fraud'
The number of companies affected by fraudulent activity has jumped year-on-year to 71 per cent, according to over 900 senior executives polled globally in the latest Kroll Global Fraud Report.
This is sharply up from their previous year's findings, which indicated 63 per cent of European companies were affected by fraud. The new 2013 report further noted an increase in every of the seven categories of fraud it measures.
The global average of businesses reporting to have been a victim of fraudulent activity is put by the report at 70 per cent. The largest increase was in vendor, supplier or procurement fraud, which it says now affects 17 per cent of firms, up from nine per cent the year before.
The seventh annual fraud report, commissioned by Kroll along with the Economist Intelligence Unit, finds the globalisation of commerce is increasing fraud exposure, as companies branch out into overseas markets where there is more risk, and increase their reliance on outsourcing.
They found doing business in markets like Africa, India and Latin America carries the most risk, increasing the vulnerability of 30 per cent of companies to fraud, while half of all firms said they would not presently consider expanding into these and other particular markets overseas because of the risk of corruption.
Over a quarter of businesses polled said their exposure to fraud had increased over the past year, up from over half just a year before.
Most fraud, the report found, is discovered internally; and of the European companies affected by fraud and where the perpetrator is known, in 69 per cent of cases at least one insider was involved.
In cases where the fraud was uncovered, nearly two thirds of cases were discovered by management while an internal audit uncovered nearly half of all cases.
Information theft was found to be the second most prevalent type of fraud - with one in five companies reporting they were highly vulnerable - and three quarters of businesses saying they were moderately vulnerable to it.
One of the highest general fraud levels identified by territory this year was in India, where incidences of fraud committed by vendors and suppliers were well above the global average, as well as the BRIC average.
Over a third of Indian companies said their firms had become even more vulnerable to corruption and bribery-related fraud, well above the survey average of 20 per cent.
Reshmi Khurana, Head of Kroll in India, commenting on the increased incidence of corporate fraud in India saying that fraud and corruption continue to stay top of mind for companies looking to do business in India.
"Companies must continue to create strong and well-organised internal control systems to prevent fraud and develop best practices to respond to fraud when it arises,” he said.
Companies in Asia are increasingly investigating corrupt vendors for potential fraud, but the survey suggests that they can be doing far more in this field.
"Even though India leads in vendor fraud and fraud undertaken by junior employees, only 45 per cent of respondents in India plan to increase investment in vendor, partner and client due diligence,” Khurana added.