ECONOMIC crime or corporate fraud continues to be a significant threat to large and small corporations worldwide, including countries in the Asia-Pacific, PricewaterhouseCoopers (PwC) Malaysia executive chairman Datuk Johan Raslan said.
Fraud remains a bane in most businesses globally, but if companies take adequate security measures, the number of fraud cases and value of financial losses could be reduced substantially each year, he told StarBiz in Petaling Jaya.
According to the Global Economic Crime Survey 2003 conducted by PwC, about 39% of companies in the Asia-Pacific suffered from fraud in the previous two years and the average fraud recovery on losses were about 20% or less.
The survey involved interviews with 3,623 individuals, mainly chief executive officers, chief financial officers and those responsible for detecting and preventing economic crime in 1,000 companies in 50 countries.
Johan said Malaysian companies were also more susceptible to fraud if security measures were inadequate.
In Asia-Pacific, the discovery of fraud is quite often by accident, he noted (see chart).
According to Johan, the challenge for local companies is to strengthen fraud risk management practices to minimise fraud and enable companies to maintain their competitive advantages while trying to capitalise on market opportunities, locally and abroad.
He said the level of risk and financial losses due to fraud was likely to increase as local companies expanded their operations offshore, adding that fraud was especially prevalent when security controls were poor and when operations were far away.
These companies must be wary that they're working in an unfamiliar territory with different rules and regulations, he said.
PwC senior executive director Lim San Peen said there were many types of fraud but the survey found that corruption and bribery (24%), product piracy (21%) and cyber crime (16%) in particular were the most common types for companies in the Asia-Pacific, including Malaysia.
The survey revealed that companies in Asia-Pacific were more often victims of corruption and bribery in the past two years, Lim said.
Interestingly, only 25% of companies in the Asia-Pacific have implemented any fraud-related training for the board of management.
But reassuringly, he said the survey showed that companies in the region were taking corrective measures to ensure they were less exposed to economic crimes in future.
Codes of conduct were observed by 75% of the respondents and the measures taken were the most common forms employed in crime prevention, he said.
Johan said it was vital for those in the management, especially chief executive officers and managing directors, to abide by security procedures set against fraud and behave in an exemplary manner for their staff to follow.
The tone from the top is vital in order to create a corporate culture of what is acceptable behaviour, he said.
Did you find this article insightful?