Cos feel frauds are 'inevitable cost' of doing biz: KPMG

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55% of respondents indicated that their organisations experienced fraud: survey (Reuters) 55% of respondents indicated that their organisations experienced fraud: survey (Reuters)
Summary55% of respondents indicated that their organisations experienced fraud: survey

Corporate frauds in India have increased in the past two years and companies consider them to be inevitable cost of doing business, says a survey. This trend is 'dangerous' as it could lead organisations to have a tolerant approach towards fraud, said the Global consultancy KPMG's biennial, 'India Fraud Survey 2012', released today.

It revealed that many companies are setting aside some amount of their turnover taking into account possible frauds, leakages or theft.

In the last two years, there has been a substantial increase in the incidence of frauds. "Close to 55 per cent of respondents indicated that their organisations experienced fraud in the last two years vis-a-vis 45 per cent in 2010 edition of our survey," KPMG said.

The findings come at a time when some high profile corporate frauds such as the one related to Reebok have come to light.

About 71 per cent of the respondents felt that frauds are an inevitable cost of doing business, the report said. Among the respondents, 80 per cent are those who stated that they had experienced fraud in the last two years. "Indian companies outnumbered multinational firms in this view," it added.

The growing pressure to perform in companies amid tough economic conditions more often leads to situation that results in frauds, Rohit Mahajan, Partner and Co-Head (Forensic Services) at KPMG in India, said.

"The futuristic frauds identified rely on technology and allow fraudsters to work in groups to leverage their full might. Irrespective of size, sector and operations, every company was vulnerable," Mahajan noted. Around 293 companies, including public sector entities, participated in the survey conducted in June this year.

As many as 94 per cent of the respondents felt that frauds have become more sophisticated.

"Bribery and corruption (83 per cent) is perceived to be a major concern followed by e-commerce and other cyber related frauds (71 per cent) and diversion/theft of funds or goods (65 per cent)," the survey said.

Cyber crime, intellectual property fraud, piracy and counterfeiting, and identity theft have been identified as the key fraud risks of the future.

Even though many respondents were aware of such frauds, they had limited knowledge about the way in which "these frauds manifest themselves or how organisations could tackle them", it said.

As per the survey, "vendors/agents" are most susceptible to commit fraud, followed by "management employees (senior managers and above), non-management employees (managers and below), business associate and customer. Financial services and information and entertainment sectors

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