'Corporate frauds set to rise in India over next two years'

A study by Deloitte India found that among key reasons for continued dominance of well known corporate frauds is reliance on inadequate or dated mechanisms to manage fraud risks.

December 16, 2014 07:34 pm | Updated 07:55 pm IST - KOLKATA:

Corporate frauds are set to rise in India over the next two years, outpacing India Inc.’s efforts to mitigate it, a survey has found.

The study, conducted by Deloitte India, found that among the key reasons for the continued dominance of well known corporate frauds in India is the reliance on inadequate or dated mechanisms to manage fraud risks.

 

“We have observed that companies make limited investments in the area of fraud risk management and tend to rely on a generic set of controls to mitigate all frauds. Over the years these mechanisms can lose their effectiveness, thereby exposing companies to the risk of fraud...” said Rohit Mahajan Senior Director & Head Deloitte Forensic.

 

Curiously, a majority of survey respondents indicated that emerging fraud risks arising from social media, e-commerce, cloud computing and virtual/crypto currency fraud did not pose a challenge to their organisations.  Accordingly, adequate steps were not being taken to mitigate these frauds.

 

In line with global trends, survey respondents indicated relying on whistle-blower hotlines, internal audit reviews and IT controls. This is seen as an indicator that corporate India is evolving towards mature practices in this area.

 

However, action taken on detection of frauds continues to remain conservative. This includes internal investigations, disciplinary action against fraudster and renewal/updating of existing controls.

 

An overwhelming majority of the 400 chief executives surveyed felt that a stringent regulatory environment could help reduce instances of fraud in the future. Regular monitoring, due diligence checks and use of proactive data analytics were key processes that need to be implemented as part of their fraud risk management framework survey. 

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