Organisations operating in multiple geographies, legal environments and cultures face a complex set of challenges and risks as they develop their business.
The fifth edition of Kroll's Global Fraud Report, prepared in cooperation with the Economist Intelligence Unit, illustrates the speed at which the fraud threat is evolving, and reinforces the direct financial benefit to those organizations who actively manage their fraud risk.
Vendor, supplier and procurement fraud is an increasing problem in Asia.
In a recent Global Fraud Survey, a third of the respondents said that they had suffered from this type of fraud in the past year.
India, too, has a number of significant fraud problems. Its prevalence is among the highest in the survey.
Let us have a look at how pervasive the problem is in India and how it stacks up against China and North America.
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Here's how prone companies are to fraud in India, China, US
Companies affected by fraud (all data is 2010-11)
India: 84 per cent
China: 84 per cent
North America: 66 per cent
A positive finding in this year's report is a drop in the overall prevalence of fraud - from 88 per cent of respondents having suffered an incident in the last 12 months to 75 per cent.
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Here's how prone companies are to fraud in India, China, US
Types of fraud impacting companies
Corruption and bribery: 31 per cent in India
Corruption and bribery: 19 per cent in China
North America: Not available
However, a number of specific fraud types are growing more common: in particular, management conflict of interest, supply chain fraud, internal financial fraud and corruption are of mounting concern.
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Here's how prone companies are to fraud in India, China, US
Information theft, loss or attack: 27 per cent in India
Information theft, loss or attack: 28 per cent in China
Information theft, loss or attack: 26 per cent in North America
The good news is that the two biggest areas of fraud - theft of physical assets and theft of information both saw small declines this year.
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Here's how prone companies are to fraud in India, China, US
Internal financial fraud or theft: 23 per cent in India
Internal financial fraud or theft: 20 per cent in China
North America: Not available
This year's survey indicates that when fraud dissuades companies from doing business in a country or region, corruption is by far the biggest specific concern.
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Here's how prone companies are to fraud in India, China, US
Theft of physical assets or stock: 23 per cent in India
Theft of physical assets or stock: 20 per cent in China
Theft of physical assets or stock: 23 per cent in North America
Corruption is a growing risk for companies worldwide. Its prevalence has shown the biggest increase of any of the frauds covered in the survey, nearly doubling from 10 per cent last year to 19 per cent in the latest survey.
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Here's how prone companies are to fraud in India, China, US
Vendor, supplier or procurement fraud: 22 per cent in India
Vendor, supplier or procurement fraud: 33 per cent in China
North America: Not available
The prevalence of information theft declined in the last year, from 27 per cent to 23 per cent, but that does not mean that companies are confident that they have the problem under control.
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Here's how prone companies are to fraud in India, China, US
Financial mismanagement: 22 per cent in India
Financial mismanagement: 22 per cent in China
North America: Not available
Moreover, the nature of the information being sought by fraudsters is also widespread, requiring potentially different defenses for distinct types of data.
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Here's how prone companies are to fraud in India, China, US
Management conflict of interest: 19 per cent in India
Management conflict of interest: 23 per cent in China
Management conflict of interest: 15 per cent in North America
The risk of fraud is real. The financial crisis did not make it worse; it simply made it more apparent and, perhaps, made the consequences more serious.
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Here's how prone companies are to fraud in India, China, US
Percentage of firms considering themselves moderately or highly vulnerable
Corruption and bribery: 78 per cent in India
Corruption and bribery: 64 per cent in China
North America: Not available
Most of the frauds took place during the good times, when our guards were lowered.
Fraud prevention is important and needs to be proportionate and relevant to fraud vulnerability.
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Here's how prone companies are to fraud in India, China, US
Vendor, supplier or procurement fraud: 59 per cent in India
Vendor, supplier or procurement fraud: 55 per cent in China
North America: Not available
Compliance systems and controls are a key part of the defense against fraud, but compliance should not become an end in itself, perhaps not even a means to an end.
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Here's how prone companies are to fraud in India, China, US
Information theft, loss, or attack: 58 per cent in India
Information theft, loss, or attack: 56 per cent in China
Information theft, loss, or attack: 51 per cent in North America
When times are good and profits are high, a fraud might be treated as an "accounting correction"; but when things are tough, that correction may result in a breach of banking covenants.
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Here's how prone companies are to fraud in India, China, US
Companies where exposure to fraud has increased: 85 per cent in India
Companies where exposure to fraud has increased: 84 per cent in China
Companies where exposure to fraud has increased: 79 per cent in North America
When businesses fail, there is a natural desire to hold someone responsible, even to accuse that person of fraud - often with some justification, although the suspect will probably claim desperately that it was just "market practice".
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Here's how prone companies are to fraud in India, China, US
Biggest drivers of increased exposure
High staff turnover: 41 per cent in India
High staff turnover: 43 per cent in China
North America: Not available
Certain "market practice" may now be recognized as, at best, improper and, sometimes, illegal; and politicians are finding that what used to be "unnecessary red tape" has become "essential tightening of the regulations.
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Here's how prone companies are to fraud in India, China, US
Average percentage of revenue lost to fraud: 2.2 per cent in India
Average percentage of revenue lost to fraud: 2.3 per cent in China
Average percentage of revenue lost to fraud: 1.7 per cent in North America
Despite noteworthy decreases in several types of fraud, companies will need to remain vigilant in their efforts to prevent information theft and IP theft.
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