Mumbai: Corporate fraud is set to increase over the next two years, but corporate India’s preparedness to tackle them is found to be lagging, according to a survey.
“One of the key reasons for the continued dominance of well-known frauds among corporate India is the reliance on inadequate/dated mechanisms to manage fraud risks,” said Rohit Mahajan, Senior Director, Deloitte Forensic. The Deloitte India Survey Report, developed on basic responses from close to 400 corporate executives across all major sectors working in the area of risk management, was released today.
Releasing the report, Mahajan said, “We have observed companies make limited investments in the area of fraud risk management and tend to rely on a generic set of controls to mitigate all frauds. Over the years these mechanism can lose their effectiveness, thereby exposing companies to the risk of fraud. This is also a likely reason why companies are unable to gauge the extent of fraud risks from new areas such as social media and e-commerce.”
The survey found that 56 per cent of respondents believed incidents of fraud would continue to rise over the next two years and highlighted diversion/theft of funds or goods, bribery and corruption, and regulatory non-compliance as the top three frauds they had experienced in the past two years.
The associated losses due to fraud appear to be conservative, as 44 per cent of survey respondents indicated emerging fraud risks such as social media fraud (69 per cent), e-commerce fraud (60 per cent), cloud computing fraud (96 per cent) and virtual/crypto-currency fraud (50 per cent) did not pose a challenge to their organisations and adequate steps were not being taken to mitigate them.
To detect fraud, survey respondents indicated relying on internal audit reviews (62 per cent), whistle-blower hotlines (53 per cent) and IT controls (51 per cent). Though this is in line with global trends for fraud detection and is an indicator that corporate India is evolving towards mature practices in this area, the actions taken upon detection of fraud continues to remain conservative. Survey respondents have revealed that disciplinary action against the fraudster (87 per cent) and renewal of updating of existing controls (77 per cent) as the key steps undertaken by their organisations.
To help companies understand their level of preparedness to tackle fraud, misconduct and noncompliance and identify gaps in the fraud risk management framework, Deloitte Forensic has developed a tool, called Fraud Risk Score, based on its experience of fraud investigations in India over the last two years.
