In a worldwide survey of more than 1,200 senior executives from a broad range of industries, about 32% of the executives blamed "complexity of IT infrastructure" as one of the main reasons for exposure to fraud. Other reasons mentioned by about a quarter of respondents included "high staff turnover," "entry to new, riskier markets" and other factors such as "weaker internal controls" and "increased collaboration between firms."
BY THE NUMBERS: Theft, shrink rates rise globally
According to the report, based on the survey of executives throughout the world polled in June and July, 22.9% said their companies had experienced information theft, loss or attack. This figure is actually down slightly from the 27% the year reported the year before. Proprietary data, including intellectual property, was most targeted, followed by customer information.
In addition to information-related theft, the Kroll report also detailed the extent of fraud as relates to theft of physical assets, fraud in supplier procurement, corruption and bribery, and management conflict of interest as well as market collusion and money laundering. The only other specific type of fraud reported more than information-related theft was theft of physical assets or stock, as 24.8% of the survey's executives said their companies were hit by that last year.
According to the Kroll report, fraud overall is said to cost companies an average of 2.1% of earnings in the last 12 months. 18% of those surveyed put their losses at 4% of revenues, while 53 companies reported they had even lost more than 10% of revenues to fraud.
The fraud problem is seen to be worse in some parts of the world than others.
In North America, information theft decreased slightly in the past 12 months, but it remains the most common fraud in the region, which had the lowest average fraud loss for any region.
Mexico scored high for corruption and bribery, with theft of physical assets well above average. Corruption is said to be growing in Latin America, with nearly 1 in 4 companies encountering it there.
Africa is reported to have the highest rates of bribery and corruption, and this has dissuaded companies from operating there, the report notes. India is said to be right behind Africa in bribery and corruption, with considerable information theft and loss as well.
The survey showed Southeast Asia in general as high in rates of vendor, supplier or procurement fraud and management conflict of interest. And fully 84% of the survey's respondents in China were said to be victimized by fraud last year, especially vendor, supplier or procurement fraud and information theft.
"The biggest driver of increased exposure in China is high staff turnover," the report's analysis states. A high rate of fraud in China is also said to be "perpetrated by senior management."
The survey's respondents hailed from industries that include finance, consumer goods, technology, media and telecom, healthcare and pharmaceuticals, retail and wholesale distribution, construction and engineering, natural resources, manufacturing, transportation and leisure and professional services.
According to the report, financial services was the industry sector with the highest rate of loss due to fraud at 2.7% of revenue, and the highest prevalence of information theft, loss or attack at 29%. The natural resources sector, though, had the highest percentage of companies hit by fraud last year at 29%.
The survey found that 60% of all fraud cases are believed to be committed by insiders, up from 55% last year. "Among companies that were impacted by fraud, junior employees were the most likely perpetrators at 28% followed by senior management at 21% and intermediaries or agents for the company at 11%," the report said. "This means that this year, 60% of all frauds committed were by someone who worked for the company in some way."
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