From Our Delhi Bureau
NEW DELHI: India bagged the dirty reputation of high prevalence of fraud, corruption and bribery in a global survey on economic malpractices conducted by Kroll, an international investment risk consultancy company.
It shares distinction of sharing the top position with China. As many as 84 respondents in the two countries were found victims of frauds, while investments to prevent frauds were almost negligible in these two countries.
Respondents from India cited corruption and bribery (approximately 31 per cent) and information theft, loss or attack (27 per cent) as the most common frauds experienced over the past one year.
For all the markets surveyed, India has the highest percentage of companies hit by the information theft. Internal financial fraud or theft (23 per cent), theft of physical assets or stock (23 per cent), vendor, supplier or procurement fraud (22 per cent), financial mismanagement (22 per cent) and management conflict of interest (19 per cent) are the other frauds reported by companies in India.
Kroll commissioned the London-based Economist Intelligence Unit (EIU) to conduct the
worldwide survey on fraud and its effect on business during 2011. A total of 1265 senior executives took part in this survey. EIU is the world's leading resource for economic and business research, forecasting and analysis.
The Kroll report published on Tuesday says almost 78 per cent of the respondents indicated a high or moderate vulnerability to corruption and bribery exposure in India, a figure higher than the Asian average of 63 per cent.
The number of companies with growing exposure to frauds (85 per cent) is the highest for any country or region. High staff turnover was one of the major reasons of fraud exposure according to 41 per cent of the respondents, while 27 per cent believe increased collaboration between firms was a strong factor.
According to the report, the Indian corporations have witnessed erosion in profits and challenges to their reputations due to fraud and corruption.
Richard Dailly, Managing Director for Kroll in India says, the report gives a ringside view of the fraud and corruption picture in India. "Companies need to assess their vulnerability to fraud and should incorporate strong prevention and detection controls," he added.
The report also maintains that companies in India did not appear to be investing in the right anti-fraud measures. Results indicate that less than 50 per cent of respondents in India invest in employee background screening, partner or third party due diligence and risk management systems – a surprising finding given that 59 per cent of those that suffered from fraud and knew the culprit said it was an inside job.
Measures such as third party due diligence, effective and well understood whistle blower systems and well-tested internal risk management systems would help companies in India reduce losses to fraud and corruption.