Economic crime down, but swept under carpet
While Indian companies lost Rs 6 crore in the past two years due to economic crimes only 35 per cent organisations reported the loss, writes Narayanan Madhavan.
The bad news:
Indian companies on an average lost Rs 6 crore in the past two years on account of economic crimes.
The good news:
Only 35 per cent of organisations reported they were victims of some economic crime, compared with 54 per cent two years ago.
While a debate could rage on whether the glass is half empty or half full, there is little doubt that Indian companies need to go a long way in setting up internal controls and processes to change their corporate cultures, executives of PricewaterhouseCoopers (PwC) said on Tuesday, after the accounting firm unveiled the findings of a global survey on economic crimes.
The survey of 152 Indian firms among 5,400 worldwide showed that 92 per cent felt frauds had damaged their brand value, 88 per cent said it hit staff morale, 84 per cent said it harmed external relations and 75 per cent said it strained relations with regulators.
India's 17 percentage point improvement is significant in the face of a global drop of only 2 percentage points (43 per cent from 45 per cent) in firms reporting economic crimes. The figure for Asia-Pacific as a whole was unchanged at 39 per cent. But PwC is not sure if lower reportage of economic crimes constitutes a real fall. Many companies ignore frauds or do not report them to avoid a bad image, its officials say.
"Unfortunately, levels of fraud have not diminished, despite the investment and increased vigil," said Aswani Puri, executive director at PwC India. "A lot of frauds continue to be detected by chance."
Also, the surveyors found perceptions that there were economic crimes under the noses of companies quite high, even if actually reported or discovered crimes may have fallen. A key statistic is that 56 per cent of companies decided to do nothing about such crimes.
The survey, conduced independently on behalf of PwC by research firm TNS Emnid, also revealed that a typical fraudster is a male graduate between 31 and 40 years, whose "need and greed" drives him towards defrauding corporates.