Mumbai: The Global Fraud Report 2013-14 indicates that companies in India remain complacent about fraud despite increasing vulnerability from insiders.

The report released today shows 71 per cent of those surveyed in India said that their exposure to fraud has increased, up from 67 per cent of respondents who reported such an increase last year. The findings are contained in a study commissioned by Kroll, a market leader in corporate investigations, with the Economist Intelligence Unit, of more than 901 senior executives worldwide, including 51 in India.

Whilst Indian companies have always operated against the backdrop of a high-corruption environment, 37 per cent of respondents acknowledge that their firms have become even more vulnerable to corruption and bribery related fraud, up from 32 per cent last year and well above the survey average of 20 per cent.

The companies experienced an above average incidence of seven different types of fraud that included theft of physical assets — 33 per cent of Indian companies as against a global average of 28 per cent; corruption and bribery — 24 per cent compared to 14 per cent; internal financial fraud — 22 per cent as against 16 per cent; and information theft — 24 per cent as against 22 per cent.

The average loss to fraud at 1.4 per cent of revenues, up from 1.2 per cent last year, is significantly higher than the global average of 0.9 per cent.

Commenting on the increased incidence of corporate fraud in India, Reshmi Khurana, Head of Kroll in India, said, “Fraud and corruption continue to stay top of mind for companies looking to do business in India. A number of domestic and international companies we have been in discussions but are delaying investments in India because of corruption and bribery related risks [as well as] vendor and procurement related fraud.

“This poses a substantial threat to India Inc. This combined with a tough business environment means that companies must continue to create strong and well-organised internal control systems to prevent fraud and develop best practices to respond to fraud when it arises.”

The study revealed that insider fraud is particularly rife in India compared to other BRIC countries.

Of those Indian companies that suffered from fraud in the last year and where the perpetrators were known, 89 per cent indicated that the perpetrator was an insider of some sort.

Notably, 69 per cent of respondents indicated that junior employees appear to be the leading culprit. This is far higher than experienced in Brazil, Russia and China.

Tom Hartley, CEO of Kroll, commented, “It should come as no surprise to anyone whose job is to combat fraud that the global incidence of fraud is rising. But the measure of a good company is not whether or not you’ve suffered a fraud, it’s how you prepare for it, how you deal with it and how you move on afterwards.”