Indian companies had the highest incidence of fraud including from corruption, bribery and regulatory compliance breach, as per a survey report by Kroll, a US-based corporate investigations and risk consulting firm.
The Annual Global Fraud Survey, commissioned by Kroll and carried out by the Economist Intelligence Unit, polled 768 senior executives worldwide from a broad range of industries and functions from January through March of 2015. Out of this 24% of respondents were from the Asia-Pacific region.
Of the 40-odd companies surveyed in India, corruption and bribery (25%), regulatory compliance breach (20%), IP theft (15%) and money laundering (7.5%) were the major reasons for the fraud committed in the country.
The survey highlighted that IP theft was emerging as a major concern for India with 41 per cent of respondents feeling their firms are highly vulnerable to IP theft related fraud, well above the number last year of 14 per cent and the survey average of 13 per cent.
“From the survey, we find that cyber risks have been an increasing concern among multinationals globally…As per the survey, India Inc’s vulnerability to fraud has risen with 92 per cent of respondents saying their exposure to fraud has increased, up from 71% in 2013,” said Reshmi Khurana, Managing Director and Head South Asia, Kroll.
She added, “This is consistent with our experience on-the-ground in India. Despite these rising concerns, companies in India are not investing in the appropriate anti-fraud strategies. Companies must continue to create strong and well-organized fraud detection systems to prevent, respond to, and investigate fraud when it arises. This will help improve the ease of doing business in India.”
They need to tighten their IT security, develop a strong whistle-blower policy and better understand how insider fraud is committed in their organization. This will help curtail future occurrences of fraud, she said.
In India, companies felt most vulnerable to vendors, suppliers or procurement fraud (77% of respondents); the highest among all countries surveyed.
Among the BRIC nations too, India was most susceptible to fraud ranging over the global average in most type of frauds.
Generally, the revenue loss of such companies is about 1 per cent of its business, Khurana added.
While companies in India are willing to spend to improve their level of anti-fraud protection, it appeared that such funds are not being invested appropriately.
“In India, identification of frauds through External Audit/ Investigations has increased materially from 5 per cent in 2013 to 30 per cent in 2015 implying the role external agencies can play. About 70 per cent said they currently invest in Financial checks (financial controls, fraud detection, internal audit, external audit, anti-money laundering policies) and 64 per cent plan to increase investment in Information (IT security, technical countermeasures),” the report added.