Is your company under the high attrition ambit? Make sure that your internal controls are in place or else welcome to the world of fraudsters. A report released by Kroll, a leading US-based risk consulting company, indicates that high staff turnover is amongst the main factors leading to increase in corporate frauds. 32% of respondents surveyed by Kroll confirmed the same, amongst which respondents from the Asia-Pacific region showed the highest concern. 40% of Asia respondents said that staff turnover has increased their company’s exposure to fraud.
The Kroll report covered nearly 900 senior executives worldwide. In the past three years, the average damage from corporate fraud among large companies – defined as those with an annual turnover of more than $ 5 billion – was more than $20 million, with about 1 in 10 losing more than $100 million. On India specific basis, 7% of India respondents said fraud has cost them between $100,000 to $1 million, while 39% said it cost them below $100,000.
“The indifferent attitude on the part of companies regarding the kind of locks and keys they need to pad up the technology is exposing them to grave danger,” said Sri Kiran Raghavan, regional manager, RSA, the security division of EMC, yet another security solutions provider.
“Companies need to classify what is confidential and what is not,” he added. Further, the classification of the levels of employees and the kind of information reached out to them, according to Raghavan, will put the companies in a better position to combat frauds.
However, the lenient attitude on the part of companies is letting even the low level employees gain access to the most confidential data like trade secrets or proprietary data of the organisation. These data usually float unguarded as emails on the worldwide web.
The report indicates that all the factors closely tied with modern business practices including complex IT arrangements, entry into new markets and increased collaboration between firms are among the main reasons behind high exposure to corporate frauds.
Entry into new markets is of particular concern for larger firms. It was also the main reason highlighted by a KPMG report few months back. The report indicated how Indian companies going overseas are more vulnerable to frauds backed by the one-size-fits-all investigative procedures. Moreover, these companies do not have a well defined email retention policy.
“Cross-border probe.n will be a much bigger issue for Indian companies compared to US . MNCs.), who are better equipped to tackle frauds and have been doing it for years,” explained Arpinder Singh, executive director, Forensic Services, KPMG. “In India, there is no such rule regarding retention of emails and how long they should be retained,” he added.
However, things are changing with more and more Indian companies increasingly abiding to Clause 49 of the Listing Agreement and initiating the whistle- blower policy. When contacted, HR officials of a few Indian companies indicated a few measures like banning of social networking websites in office premises, to conducting meetings without paper so that confidential data like trade secrets don’t float out of the close door, are some of the steps being undertaken by companies to combat such frauds.