23 August 2011 - Many companies reported an increase in detected fraud during 2009-2010, according to a KPMG survey of managers in countries across Central and Eastern Europe. Most respondents indicated that the increase was due to a heightened focus on fraud risk management during the crisis and not due to an increase in underlying levels of fraud. The study took into account responses from a representative number of respondents across seven countries surveyed: Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, and Romania.
Jimmy Helm, Head of KPMG Forensic in Central and Eastern Europe, comments: “The survey results would seem to support the common observation that fraud tends to bubble to the surface more frequently during times of recession than during times of growth. The increased focus apparently placed by organizations on fraud risk management in the wake of the crisis is consistent with the need to better control costs at a time when resources were scarce.”
While most of the types of fraud which increased were types commonly encountered in a commercial environment, it is notable that some 45% of CEE respondents (Romania: 43%) reported increases of ‘Theft or leakage of sensitive information’ over the period of the review.
Kemal Özmen, Director, KPMG in Romania, and Head of KPMG Forensic in Romania, the Balkans and Serbia comments: “We’ve seen an increase during the last few years of companies approaching us to assist in investigating information theft and leakage. Clearly there is a balance to be struck between protecting information assets against misuse and enabling them to be leveraged for the benefit of the business, but many companies are simply not giving the issue adequate consideration. Arguably your information is even more valuable to competitors in tough economic times, and restructuring within many organizations has created disgruntled employees with the opportunity and motivation to assist them in obtaining it.”
67% of Romanian respondents indicated that their organizations had been motivated by the crisis to invest in enhancing internal control mechanisms to improve fraud risk management, and 43% believed that their organization would make further enhancements over the next two years.
Kemal Özmen comments: “It is interesting to note that most of the enhancements made immediately following the crisis were directed towards fraud prevention rather than detecting or responding to fraud that had occurred. While prevention, detection and response are all vital to an effective fraud risk management strategy, well-chosen and well-implemented prevention measures certainly have the greatest capacity to improve an organization’s bottom line.”