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ECONOMIC CRIME SURVEY: Asia-Pacific firms suffer major losses

Source: The NATION
Date: July 16, 2003

Stop Cyber Crime Asian businesses face a major menace in the form of economic crime, with nine out of 10 companies hit by fraud recovering less than 20 per cent of losses, according to Pricewaterhouse-Coopers (PWC) Global Economic Crime Survey 2003.

In the Asia-Pacific region, industries in the manufacturing and industrial products sector are highly susceptible to economic crime, with product piracy a major vulnerability.

About a quarter of Asia-Pacific organisations identified product piracy and counterfeiting as a threat for the next five years.

The report said that "cybercrime" (30 per cent of respondents), corruption and bribery (27 per cent) and product piracy (24 per cent) have been identified as major concerns for organisations in the region over the next five years

Misappropriation and financial misrepresentation have been identified as significant risks and are far more widespread across the entire spectrum of business and industry types.

Looking to the future, a majority of companies in Asia Pacific expect fraud to increase in the next five years and 35 per cent of companies who responded expect their greatest fraud risk to continue to be asset misappropriation.

"Far from being a victimless crime, fraud can have a material and lasting impact on businesses, their share price and reputation. The risks and incidence of economic crime will not drop without substantial actions to tackle its roots," said Charles Ostick, a PWC (Thailand) partner in Financial Advisory Services

"Companies that have been fortunate enough not to have suffered from fraud should learn from those companies which are investing n a comprehensive fraud risk management plan in order to withstand the persistent threat of economic crime," he said.

The financial loss from economic crime is difficult to quantify, especially for less tangible economic crimes such as cybercrime. Slightly over one third (36 per cent) of companies in the region that had reported fraud were unable to put a value on the crime. According to global statistics, the real financial cost of fraud extends beyond the average loss of US$2.2 million (Bt91.3 million).

Not only are such losses rarely recovered, but also companies are unlikely to be insured: less than half (38 per cent) of the businesses surveyed had taken out insurance against fraud losses.

The real cost of fraud cannot be measured solely in financial terms but in the context of wider collateral damage such as weakened staff morale, tarnished reputation and brand^; and damage to business relationships, share price and financial market opportunities.

While over three-quarters of the respondents in the Asia-Pacific region have taken corrective measures to manage and prevent economic crime, more tangible, state-of-the-art methods should be considered as part of an effective fraud-risk-management system, PWC said.

Worldwide, the highest levels of economic crime were reported in Africa (51 per cent) and North America (41 per cent).

According to global statistics, larger companies, with over 1000 employees in a country, are most vulnerable to fraud with 52 per cent reporting economic crime in the past two years. This compares with only 37 per cent of smaller companies reporting fraud.

Larger companies' investments in unfamiliar overseas markets, the devolution of management control and investment in superior fraud-risk-management systems help to explain higher detection rates in larger businesses, the report said.

Financial services firms reported more fraud than any other industry. For example, one in six banks worldwide reported uncovering money laundering during the previous two years^; the result of improved control and compliance systems, and ongoing efforts to raise awareness of money laundering.

The specific nature of the financial services industry - providing access to complex financial transactions and significant quantities of physical assets -has proved to be an obvious target for defrauders.

Original article: http://www.nationmultimedia.com/page.news.php3?clid=6&id=17269&usrsess=1

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