Corporate India sleepless over spying

Corporate India sleepless over spying
SANJAY SARDANA

NEW DELHI, MAR 25: Corporate espionage is spreading rapidly in India, adversely affecting or threatening to affect businesses. As many as 72 per cent of the respondents covered in India Fraud Survey Report 2001 of global consultancy firm KPMG said corporate espionage has already affected or could affect their businesses. The survey covered 120 corporates.

Consumer product segment accounted for the maximum number of frauds in terms of percentage. As many as 89 per cent of respondents from this sector said they suffered a fraud, followed by the hospitality (67 per cent) and the retail (50 per cent) industry. However, the actual number of frauds was the highest in the manufacturing sector followed by consumer products and financial services sector.

Almost 46 per cent of the corporate frauds were committed by employees, 13 per cent by suppliers and another 12 per cent by service providers, says the survey.Women are fast catching up with men. The percentage of female fraudsters has risen to 11 per cent from 8 per cent since the last survey conducted in 2000. However, the profile of the typical fraudster continues to be the same as last year. It’s usually a male aged between 26-40 years, earning between Rs 1 lakh-Rs 2.5 lakh and having spent between two to five years in the organisation.Respondents cited expense accounts (35 per cent), secret commissions (26 per cent) and false invoices (23 per cent) as the most expensive types of frauds. The other types of frauds include counterfeiting, forged cheques and loan documents, transportation contracts, bogus claims, fake mail transfers, and disappearance of customers.

Close to 50 per cent of the respondents have experienced fraud of one form or the other in their organisations. Of these, close to 65 per cent of the organisations could quantify their losses to the tune of Rs 94 million, while the balance 36 per cent were unaware of the amount of loss suffered by them on account of frauds.

The survey aimed at determining the outlook of the senior management towards various aspects of frauds, their experiences with frauds and steps taken by them. The questionnaire concentrated on issues like e-frauds, corporate espionage, experience and prevention of frauds, internal/external investigations, investigations by police/regulatory agencies and profile of the fraudster.More than 51 per cent of the respondents felt that internal methods like internal auditor reviews and internal controls (42 pere cent) are more effective tools to detect frauds than external methods. Corporates prefer internal investigations to external ones, as close to 86 per cent of the respondents adopted the internal method for investigation into frauds.

An analysis of the areas of losses for the three major lines of businesses (categorised by the highest number of actual incidents), that is, consumer products, manufacturing and financial services, shows that misappropriation of funds and false financial statements were the largest area of loss in the financial services sector. But it was much lower in case of manufacturing and consumer product segments. Other major fraud-prone areas in the financial services sector were ATMs and credit cards.