Despite a significant drop in cases this year, executives globally are reporting increased vulnerability to nearly all types of fraud, from corruption and information theft to compliance breaches and collusion, according to Kroll’s annual Global Fraud Report.
Conducted in conjunction with the Economist Intelligence Unit and surveying the sentiments of more than 1,200 senior executives worldwide, the report notes the overall prevalence of fraud around the globe decreased this year to 75 percent from 88 percent last year, with roughly one in four companies hit by physical theft of cash, assets and inventory or information theft, both down from record highs in 2010.
In contrast, management conflict of interest (21 percent), vendor, supplier or procurement fraud (20 percent) and internal financial fraud (19 percent) all saw notable increases. The incidence of corruption and bribery nearly doubled over the past year from 10 percent to 19 percent.
Despite the overall drop, companies are far from relaxed; instead fraud concerns are on the rise, with a 15 percent increase in respondents saying they are moderately or highly vulnerable to fraud. Half of all companies surveyed (50 percent) said they are moderately to highly vulnerable to information theft in particular.
With respect to China, while respondents there reported a drop in the prevalence of fraud to 84 percent from 98 percent in 2010, there are a number of fraud types that are considerably more common this year.
Vendor, supplier or procurement fraud was experienced by 33 percent of respondents in China, well above the global figure of 20 percent. Twenty eight percent of respondents in China were hit by information theft in the past 12 months, a sharp rise from the 16 percent that experienced this in 2010.
Even after the decline in overall fraud incidences, China still has the second highest proportion of companies affected by fraud of any country or region, just falling below Africa’s 85 percent.
Similar to the global trend, companies in China reported that their exposure to fraud has increased, to 84 percent of respondents versus 72 percent in 2010. For corruption, information theft and vendor fraud, the proportion of companies where respondents recognized that they are moderately or highly vulnerable has more than doubled compared to 2010.
“This year’s Global Fraud Report illustrates just how substantially the fraud environment has changed in the past 12 months,” says Violet Ho, Kroll managing director, Greater China. “Today’s schemes are significantly more sophisticated, involving complex structures and collusion which enable fraudsters to cover their tracks. This is a major change from the frequent cases of theft of physical assets which was commonly reported last year. Companies need to match their prevention and detection controls with the evolving risks they face.”
- Next page