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Information theft Asia's biggest fear: New Fraud Report

Ross O. Storey | Sept. 16, 2008
Widespread fraud growing in world's manufacturing hub

SINGAPORE, 16 SEPTEMBER 2008 - A major survey of global executives has found that physical theft (41 per cent) is the most common problem for companies in Asia, followed by information theft (31 per cent) and regulatory or compliance breaches (28 per cent).

Globally, the average company loss to fraud has increased by 22 per cent, largely driven by the credit crunch and tough economic climate. Companies lost an average of US$8.2 million to fraud in the past three years, compared to last year's US $7.6 million.

The trends and figures are from a survey that risk consulting company Kroll commissioned from The Economist Intelligence Unit of 890 senior executives worldwide. Thirty per cent of the respondents were based in the Asia-pacific, one-third in North and South America, slightly more than a quarter in Europe and 11 per cent in the Middle East and Africa.

More than four out of five companies surveyed (85 per cent) have suffered from corporate fraud in the past three years, up from 80 per cent in last year's survey. For larger companies the proportion suffering from fraud rose to 90 per cent.

Construction and natural resources sectors hit

The survey found that the construction and natural resources sectors suffered the most incidents of fraud, due partly to high oil prices and an industry shift to higher-risk areas.

Healthcare, pharmaceuticals and biotechnology saw an increase in problems with corruption and theft of stocks or assets, while travel, leisure and transportation reported increases in regulatory and compliance breaches and information theft or loss.

The most common type of fraud amongst financial services firms is breach of regulatory

compliance, a growing problem which, the report said, receives too little attention. Compliance breaches continue to plague this highly regulated industry with 44 per cent of financial service firms in Asia affected by such fraud in the past three years.

Respondents in Asia feel most vulnerable to the threat of information theft (71 per cent) followed by regulatory or compliances breaches (58 per cent) and vendor, supplier or procurement fraud (56 per cent).

Fraud expected to increase

Anne Tiedemann, regional managing director for Kroll's operations in Asia, said that the findings showed that fraud was not only widespread, but also growing.

We expect to see this increase further as conditions become tougher for business and the full impact of the credit crunch unfolds, Tiedemann said .When you look into the causes of fraud, companies that cited high staff turnover or weak internal controls suffered much higher levels of fraud - in almost every case increasing their exposure by one-and-a-half times. Companies need to look carefully at how they can address these issues to reduce their risk to fraud and improve their business operations.

 

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