Indian companies are ill-prepared to handle frauds and corporate espionage, says the 2003 fraud and misconduct diagnostic survey conducted by professional services firm KPMG.
As many as 58 per cent of the 196 respondent company executives said they had no policy to counter corporate espionage.
Around 50 per cent of the respondents covered by the survey said their companies did not have in place a conflict-of-interest policy. Around 72 per cent said they were not required to sign annual conflict-of-interest declarations.
"Such declarations are the teeth of any conflict-of-interest policy," KPMG Forensic Executive Director Deepankar Sanwalka pointed out.
The survey also shows that Indian companies do not have adequate screening procedures to bar fraudsters from joining.
Only 48 per cent of the respondents believe that the recruitment procedures at their organisations have enough checks to screen fraudsters.
Only 13 per cent of the respondents claimed to be aware about the frauds that could occur in their organisations, though 50 per cent said they were happy with their organisations' understanding of fraud risks.
Fourteen per cent said senior executives did not have the experience to identify fraud indicators while reviewing financial results.
"It is worth noting that most of the big frauds are perpetrated by the senior managements," Sanwalka added.
The survey also shows that companies do not have well-developed channels of communication to report frauds or corporate espionage.
While 10 per cent of the respondents said channels for reporting suspected frauds were non-existent in their organisations, 51 per cent said the channels needed to be worked on.
Around 16 per cent said documentation and communication surrounding frauds were non-existent in their organisations, and 46 per cent said such policies needed improvement.
Around 25 per cent of the respondents were chief executive officers, and 35 per cent chief financial officers.
"The average turnover of the companies surveyed would be around Rs 250 crore (Rs 2.5 billion), with 12 per cent recording sales in excess of Rs 1,500 crore (Rs 15 billion) in the last financial year," Sanwalka said.
However, the extent of fraud or corporate espionage does not seem to be very high. Around 10 per cent of the respondents said their organisations had been victims of corporate espionage, while 72 per cent said their companies had seen no such instance.
Around 44 per cent said their organisations could become victims of corporate fraud.
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