The main perpetrators of fraud in 2015 are said to be junior employees, with 45% Indian companies being affected by scams/frauds conspired by junior employees. Senior management had only 25% role in the case of 25% companies, the report said.
The Global Fraud Report 2015 by risk management firm Kroll and the Economist Intelligence Unit (ECU) is just out.
And you know what it’s saying? Corruption and bribery were the biggest drivers of frauds in India, with 25% companies being affected. About 15% companies were guilty of regulatory compliance breach and 20% were hit by intellectual-property theft. And 7.5% companies were involved in money-laundering activities.
Well, that wouldn’t shock any of us. Now, read the next finding.
The main perpetrators of fraud in 2015 are said to be junior employees, with 45% Indian companies being affected by scams/frauds conspired by junior employees. Senior management had only 25% role in the case of 25% companies, the report said.
Something amiss there? Are junior guys being made the scapegoat? Well, listen to Reshmi Khurana, managing director of Kroll itself.
“This could be a one-sided view as the survey was done among senior management people. Hence, there is a chance that they might have passed the responsibility down,” she says.
Others agree. It is not possible to drive such frauds without the complicity of promoters or directors. The infamous 'Satyam accounting scam', worth Rs 7,000 crore, is the best instance of a fraud done by the promoter, B Ramalinga Raju, they point out.
The report didn’t say how many companies it surveyed. What it said is that a total of 768 senior executives of companies, globally, from a wide-range of industries, including financial services, professional services, health and pharmaceutical, retail, manufacturing and infrastructure, participated.
But Khurana makes another point. “Companies must continue to create strong and well-organised fraud detection system to prevent, respond to, and investigate fraud when it arises. This will help improve the ease of doing business in India. Companies in India are not investing in appropriate anti-fraud strategies.”
Bhawna Doshi, senior adviser of KPMG India, said: "Major companies in India are promoter-driven and management control is usually personal and fairly stringent. Scope for fraud is less and identification faster in such companies.”
Globally, three out of four companies in the world fell victim to fraud incidents in the past year -- a rise of 14% in just three years, the report said. The report said 80% Indian companies were affected by fraud in 2015, compared with 69% in 2013.
Interestingly, the biggest fraud threat to companies in India is from their staff themselves.
The incidence of insider frauds among BRIC (Brazil, Russia, Indian and China) countries is the highest in India, says the report.
The report estimates the loss to a company as 1% of the total turnover.
Half of the respondents, globally, felt highly or moderately vulnerable to fraud by vendors, suppliers In India.
Despite vulnerabilities to suppliers and a high proportion of fraud being perpetrated by insiders, only 55% companies in India have invested in vendor due diligence and only 28% in staff background screening.
“India is highly susceptible to insider fraud and I believe companies are beginning to understand that they need to do more to mitigate this risk. While it is crucial to deal with this issue in the recruitment process, to truly safeguard against insider fraud, companies need to do more than just enhance their screening processes. They need to tighten their IT security, develop a strong whistle-blower policy and better understand how insider fraud is committed in their organisation. This will help curtail future occurrences of fraud,” said Khurana.
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