It's the employees who are trying to cheat their companies according to the 2012/2013 Kroll Advisory Solutions' Global Fraud Report. This year's study shows that over two-thirds of corporate frauds are committed by insiders, up for the second year in a row from 60 percent last year and 55 percent in 2010. Fraud continues to hit many global companies with more than six in ten companies reporting they were affected by fraud last year. The findings are contained in a study of more than 800 senior executives worldwide commissioned by Kroll Advisory Solutions with the Economist Intelligence Unit. Information theft remains one of the most widespread frauds facing companies. Its slight decline - 21 percent of companies are affected this year compared with 23 percent in the last survey -shows that it is more resilient than some other frauds, which saw much greater declines. Moreover, it remains the fraud to which respondents feel most vulnerable. Thirty percent say they are moderately or highly vulnerable to information theft and cite IT complexity as the leading cause of increased exposure to fraud risk. Surprisingly, it is employees, rather than hackers, who are more to blame for the loss of information. Where there has been a loss, 35 percent of the time the issue is employee malfeasance, which is more than twice the rate at which external hackers are to blame. “The fact that overall fraud is down globally reflects the focus and consideration that major corporations are paying to the issue,” said Robert Brenner, Senior Managing Director and Practice Leader Americas, Kroll Advisory Solutions Investigations & Disputes Group. “However, most of those efforts have been directed at external threats. The results this year demonstrate that companies must turn their attention inward. In particular, firms need to make protection of confidential information and electronic data a top priority.” In the global report, Yaser Dajani, an associate Managing Director in Kroll's Middle East practice, wrote a special section titled “Kingdom of Saudi Arabia: Time to bridge the perception gap.” He noted, “Our experience shows that more and more companies in the Kingdom are now engaging external specialists and risk consultants to conduct fraud-related investigations as well as to design and implement fraud prevention programs. However, they remain in the minority and many still make the mistake of assuming that lawyers and accountants alone can provide sufficient protection. This in itself would suggest there is some pain to come, and the consequences could prove far-reaching and have considerable financial repercussions.” Dajani's comments are ominous. He pointed out that those Saudi companies who experience a loss through fraud quickly move to put appropriate controls in place, but those who don't feel any pain just ignore the issue. In Kroll's survey, 56 percent of respondents in Saudi Arabia asserted that their companies did not suffer any loss through fraud in the past year. Additionally, in regards to all the fraud categories covered by the survey, about 80 percent or more of the respondents in Saudi Arabia believed that they were only slightly vulnerable. “From what Kroll has seen,” advised Dajani, “there is clearly a wide gap between the perception of threat and the actual risk that Saudi businesses are facing in both domestic and foreign markets. This severe underestimation of the prevalence of fraud is particularly worrying: there is no more effective way to invite attack than to lower defenses. In our experience, the wider this gap grows, the greater the real risk becomes.” While the Saudi private sector is somewhat lagging in its commitment to fight fraud, the Saudi government has taken measures including the issuance of the National Strategy for Maintaining Integrity and Combating Corruption and the establishment of the National Anti-Corruption Commission. Saudi agencies fighting fraud include the Prosecution and Investigation Commission, the General Auditing Bureau and the Auditing and Investigation Commission. Kroll found that in the Gulf States overall, respondents reported a lower prevalence of fraud than the global average, with fewer than half of companies being affected by one such crime in the last year.
Where there was a fraud, insiders were implicated 68 percent of the time and in 85 percent of cases of information theft employees were involved in the malfeasance. One point which the Kroll survey did not consider in regards to the statistics from the Gulf States, is that it is culturally unacceptable for organizations to reveal deficiencies to outsiders. Kroll did find that in Saudi Arabia, 88 percent of respondents indicated that they have a well-defined whistleblower process.
Having such a process in place provides a means of removing corruption quietly, as has long been the preferred social option.
