Globalisation increases exposure to fraud: Study

About 50 per cent of Indian executives interviewed for a global survey on fraud feel that corporate fraud is much more prevalent in India today than it was three years ago. Forty-two per cent felt the same about China.

In both countries, 60 per cent of corporates felt vulnerable to bribes and corruption, according to the Global Fraud Report by Kroll, a risk consultancy company.

The report says that although reluctant to discuss it, nearly every business would at some point have been a victim of corporate fraud.

It points out that the extent to which industries experience corporate fraud varies according to the nature of their business.

For example, companies that deal with physical assets, such as consumer goods and retail, are more likely to suffer from the theft of physical assets or supplier fraud.

Those that operate in the "knowledge economy", such as professional services or technology, are more likely to be concerned about information theft or intellectual property issues.

Nearly 900 senior executives worldwide were interviewed for the survey. Forty per cent of them were C-level, or board-level executives.

New technologies, new investors and expansion into new overseas markets have opened the door to new forms of fraud, the report said.

"As our society has become more reliant on information technology, increased globalisation and greater interconnectedness, certain exposure has expanded right along with them," says Jules Kroll, founder of Kroll.

In some sectors, more than a fifth of companies have lost more than $1 million on account of fraud. Nearly seven per cent of Indian respondents said fraud had cost them between $100,000 and $1 million, and 39 per cent said it cost them less than $100,000.

"The risks of fraud for businesses are greater today than in the past. Even a whiff of fraud may sometimes be sufficient to place a company under severe scrutiny or in financial distress," says Anne H Tiedemann, regional managing director, Kroll, Greater China and Southeast Asia.