BackSurvey finds corporate frauds on the rise
But investment in their prevention and detection has not kept pace
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Mumbai: Instances of fraud may be on the rise among Indian companies, but investment in their prevention and detection has not kept pace, a survey of executives found.
US-based risk consulting firm Kroll Inc., in its 2015 global survey on fraud, said 80% of Indian executives surveyed said they fell victim to fraud, up 11% from the last survey in 2013.
“The outlook for the future is also worrying with 92% of Indian respondents reporting that their firms had seen exposure to fraud increase in the past year," the consultancy firm’s report said.
But only a little over 60% of companies have made investments in fraud prevention and detection and investments are low on screening staff and vendors and strengthening technological infrastructure.
Only 28% of companies invested on screening staff and 55% on vendor due diligence. The absence of a clear whistle-blower policy is also a big lacuna among companies, the report noted.
The survey was conducted among 768 executives globally, with 40 respondents from India. Respondents were asked about 11 different types of fraud, including those due to corruption and bribery, information theft, regulatory or compliance breach, internal financial fraud, money laundering and cyber frauds, among others.
Out of the 11, Indian companies reported the highest incidence in four types of fraud when compared with other countries. India fared the worst in frauds arising out of corruption and bribery, regulatory or compliance breach, money laundering and intellectual property theft, the report said.
“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," said Reshmi Khurana, managing director and head of South Asia at Kroll.
India ranks 130th among 189 countries in the World Bank’s ease of doing business report.
Khurana added that over $500 million worth of private equity investments in India are embroiled in legal disputes in the absence of a strong corporate governance framework and lack of disclosures by companies.
The focus on frauds has intensified since 2009 when it was revealed that accounts of Satyam Computer Services were falsified and chairman Ramalinga Raju was convicted after he confessed to manipulating the accounts.
The massive rise of bad assets in the banking sector also raised concerns over potential fraud-related stress.
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