58% CXOs believe corporate frauds to rise over the next two years: Survey

About 7% companies responded that they had been duped to the tune of more than Rs 100 million in a fraud in the recent period

About 58 per cent of CXOs believe that corporate frauds are about to rise over the next two years, a survey by Deloitte shows. However, at the same time, about 38 per cent companies denied experiencing any kind of fraud in recent times, India Corporate Fraud Perception Survey 2018, a report based on the survey, said. 

Partner/vendor favouratism, pilferage of inventory, diversion and theft of funds, bribery and corruption were the four major types of frauds that companies experienced. A third of the firms said they experienced fraudulent behaviour in terms of employing a partner or a vendor of choice, rather than on merit. 

However, “bribery and corruption no longer features in the top three risks faced by corporates in India,” the report said. 

About 440 CXOs in various companies were surveyed in August – October 2018. Most of the respondents were from companies with a turnover of more than Rs 2.5 billion. The results were released on December 9, which is the International Anti-Corruption Day. 

Newer types of frauds such as data breach, e-commerce-related or those due to use of artificial intelligence were experienced by a relatively less number of companies. 

Most fraudulent activities occurred during the procurement process, followed by the selection process of partner/vendor, followed by sales and marketing processes. The latter involves a lot of external outsourced agents which increases the propensity of frauds. 
 

“Even though incidents of fraud are likely to increase in the next two years, the perceived risk from bribery and corruption has fallen considerably due  to regulatory measures such as Prevention of Corruption (Amendment) Act, 2018 and Fugitive Economic Offender’s Bill,” Nikhil Bedi, Partner,  Deloitte India, said. 

He said successful adoption of technology by corporates, which have prompted them to invest in effective fraud risk mitigation strategies has helped mitigate frauds. 

About 7 per cent companies responded that they had been duped to the tune of more than Rs 100 million in a fraud in the recent period. Majority of them cost the companies less than Rs 10 million. 

When it comes to putting the blame on, the junior and middle-level management officials bear the brunt. About 42 per cent CXOs think that juniors are most likely to commit a fraud, for improving their financial position. Only 7 per cent think that customers would commit fraud. 

On prevention, about 78 per cent respondents thought that a robust internal audit prevents most frauds. While 28 per cent companies said they review their risk management methods annually, a slightly lesser proportion said they do not review unless a fraud is detected. 

Most companies are preferring creating in-house data analytics teams and using traditional tools, rather than purchase off-the-shelf corporate frauds analytics software.