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Asia -Fraud Report

Asia-Pacific region 2009 Fraud Report presented by Kroll

Friendly link to Kroll: Asia-Pacific Fraud Report

In the Asia-Pacific region, as elsewhere in the world, the downturn has impeded the ability of fraudsters to operate even as it has done the same for legitimate business.

**The average loss per company over the last three years fell noticeably from the 2008 figure, from $9.1 million to $6.2 million. With less money coming in, there is less money to steal.

**Although the number of companies experiencing theft of physical assets in the last three years (43%) increased slightly from the 2008 figure (41%) and was the highest for any region, every other category of fraud saw less prevalence albeit often not much  than in the previous survey. Overall, the number of respondents suffering from at least one fraud in the last three years dipped just slightly, from 88% in the 2008 survey to 84% this time.

**Only 22% of those surveyed saw an increase in the prevalence of fraud at their companies, against 37% who experienced a decline.

The survey suggests, however, that employee relationships continue to present a challenge across the region, and that corruption may grow as an issue.

**High staff turnover is again this year the most common factor increasing the vulnerability of Asia-Pacific companies to fraud, cited by 35% of respondents. This is the second highest of the five regional figures on staff turnover, and well above the overall average of 26%.

**Although reduced revenue on its own increased fraud exposure at only 10% of firms, the stringency around pay and remuneration which accompanied the downturn raised vulnerability to 18%, also the second highest figure.

**Even while the number of companies which experienced corruption or bribery fell slightly in this survey from the last, from 21% to 17%, the proportion considering themselves highly vulnerable rose to 15% from 10%. The large amount of stimulus spending across the region may account for this greater concern.

a substantial number of fraud cases

On the ground, Kroll is seeing a substantial number of fraud cases, not just current ones but those that began much earlier  the Satyam fraud, for example, had been going on for years before the downturn made it impossible to hide. With the big emerging economies of China and India apparently starting to leave behind the effects of the global economic crisis, the small respite which the downturn gave to fraud incidence is likely to be short-lived.

Spotlight on China

Fraud remains the Achilles heel of Chinese economic development and it goes beyond poor IP protection. In the latest survey, 96% of companies said that they had experienced at least one type of fraud in the last three years. Particular areas of concern are: vendor or procurement fraud (42% have suffered in the last three years, compared to just 21% for the whole Asia-Pacific region), internal financial fraud (31% to 18%), regulatory breaches (31% to 21%), corruption and bribery (27% to 17%), and of course IP theft (23% to 13%). In all of these cases, the regional figures are not very far off the global ones.

Fraud Risk Management in China is imperative

Greater China presents the world’s most challenging business environment. The world’s most populous country is amongst its fastest growing. Its manufacturing industry is providing the world with a vast variety of affordable consumer goods. But at the same time, doing business in China is replete with complex cultural and legal issues.

Corruption, fraud, intellectual property theft, and labor disputes are just a few of the risks faced by organizations operating, partnering or otherwise present in China. Investigations and risk assessments are not an optional extra for companies active here, it is imperative.