The 2010 enquiry into business fraud
The current economic context is increasing the risk of fraud.
The global increase in fraud raises serious questions of responsibility at company board level.
The 11th international enquiry conducted by Ernst & Young reveals that 64% of the Swiss people questioned (76% at international level) consider that their company board is increasingly concerned by its personal responsibility for fraud, bribes and corruption in connection with the business activity. These same boards are not sufficiently prepared to face the new risks.
As a result of the recession, many businesses have been looking for opportunities for growth in new markets, or by making acquisitions. This course of action exposes businesses to new types of risk, including corruption. In order to reduce such risks, businesses need to put strict, precise due diligence procedures in place.
On this last point, 46% of Swiss people stated that they rarely, if ever, employ such procedures – as against 30% in Western Europe and 30% at international level. More worryingly, due diligence procedures post acquisition are only rarely considered, and only implemented by 55% of Swiss businesses. Australia and Japan are the only other countries that come close to this figure, at 54% and 53% respectively.
These responses were taken from 1,400 financial directors, internal audit managers and legal compliance personnel across 36 countries.
Naturally, these statistics show a certain variance and divergence in the figures depending on geographical location, but for Western Europe alone, the level of fraud has gone up from 10% to 21%, with Switzerland at 16%. The fraud level for Latin America is 21%, whereas the figure for Africa and the Middle East is now at 18%.
It should be noted that the recent adoption of article 102 of the Swiss penal code has resulted in the application of stricter sanctions on dishonest behaviour by individuals and businesses, and this can be applied outside its borders.
This does not seem to have persuaded company boards to take protective action. In fact, the study shows that only four financial directors out of six have been asked to verify fraud and corruption prevention procedures over the last 12 months. Only 28% were asked to produce an evaluation of these particular threats.
Over and above internal inspections and audits, it would seem both obvious and essential to carry out regular risk evaluations for certain activities, including IT, archived and traceable information and for certain markets, in order to enable risk managers to prioritise situations where a threat exists.
http://www.ey.com/Publication/vwLUAssets/India_11th_Global_Fraud_Survey/$FILE/India%2011th%20Global%20Fraud%20Survey.pdf
Source : Ernst & Young 11th Global Fraud Survey