Economic crime still prevails in the United States and other parts of the world, as 53 percent of U.S. companies surveyed in a recent global economic crime study reported that they were affected by some form of it in the past two years, with losses totaling $223 million.
Forty-four percent of international respondents claimed to deal with economic crime as well. The statistics come from the PricewaterhouseCoopers 2007 Global Economic Crime Survey, a study that queried 5,400 global companies and was conducted in association with Germany's Martin-Luther University of Halle-Wittenberg (see Economic Crime Plagues Companies). PwC executives elaborated on the study during a press briefing this week.
The study found that fraud affects companies of all sizes and industries worldwide. These crimes have not dropped in the last eight years since the study was first initiated. The study concludes, however, that most companies are confident that their control measures will limit their exposure to fraud in the future.
Only 12 percent of U.S. firms consider it likely that they will be victims of fraud during the next two years.The study defines economic crime as asset misappropriation, accounting fraud, corruption and bribery, money laundering, and intellectual property infringement.
"Globally, no one is immune," said Steven Skalak, global investigations and forensic leader for PwC. "Not by region, not by company."
Skalak said the average direct cost of fraud has increased by 40 percent since 2005, and that the total losses reported by survey respondents added up to $4.2 billion. The average loss of each company was roughly $2.4 million. More than 80 percent of respondents who experienced fraud said that it had caused collateral damage to their business - harming morale, the brand name or the company's reputation.
"The harm is significant beyond the pure monetary effect," Skalak said.
Twenty-six percent of economic crimes involve a member of senior management. Skalak labeled that a "pretty high and disturbing percentage." The "tone at the top" and communication of the code of conduct are absolutely essential to an organization's control structure, he noted. Skalak suggested that more companies implement ethical guidelines and compliance programs to reduce this type of deceit.
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