Economic crime survey shows fraud affects 43% of major European companies

7/13/2001—At least 43% of major European companies have suffered serious economic crime over the last two years, at a cost of at least 3.6 billion Euros for the 536 affected companies. In a recently published study of European fraud, PricewaterhouseCoopers interviewed senior representatives of more than 3,400 companies, not-for-profit organizations, and government bodies in 15 Western and Central European countries. Some of the key findings include:

• One-third of all companies interviewed believe that they are at greater risk of fraud today than 5 years ago, and over 70% believe future fraud risks will be the same or greater.
• The average cost per company which experienced fraud over the last two years was 6.7 million Euros, compounded by the fact that only 1 in 5 of these companies recovered more than 50% of their lost assets, and over half the companies surveyed are not insured against fraud.
• 43% of organizations rate cybercrime as the number one fraud risk of the future. Cybercrime had already hit 13% of the European companies that had been a victim of economic crime in the last two years.
• 63% of victimized companies reported incidents of embezzlement, or theft by an employee, making internal fraud more prevalent than frauds perpetrated externally.
• 58% of known frauds were uncovered by accident or chance, revealing the inadequacy of many company control systems. Although half of all companies believe that responsibility for the detection of fraud lies with the board of directors, only 22% provide specific fraud-related training to management.
• Although almost 50% of organizations have a policy to report all economic crime to the authorities, only 38% have actually pressed charges. This highlights the fact that for many companies the associated consequences of fraud (negative publicity, a drawn out judicial process and small chances of prosecution and recovery of stolen assets) can be as damaging as the financial loss itself.
• 36% of organizations also felt that fraud had a negative impact on staff morale, and 16% believed that fraud hit an organization’s brand, highlighting how fraud can affect enterprise value over the long term.

PricewaterhouseCoopers Forensic Services recommends five key elements for a successful anti-fraud regime:

1. Assessment of existing and future fraud vulnerabilities
2. Proactive monitoring of fraud risks with clear policies to encourage and protect “whistleblowers”
3. Effective personnel policies to facilitate internal investigations
4. A robust fraud response plan
5. Communications to all stakeholders on the company’s stance on fraud

For more information or to read the complete crime report, “European Economic Crime Survey – 2001,” visit PricewaterhouseCoopers.