Deloitte Corporate Finance Limited releases the findings of its GCC fraud survey. This was conducted amongst leading GCC corporations and institutions over a wide range of industry sectors. This confidential web based survey canvassed the views of senior management across a spectrum of industries in both the public and private sector.
The survey covers issues relating to the extent of fraud in the GCC region, the impact of the global economic crisis and measures being taken to prevent, detect and respond to fraud, waste and abuse.
Executives reported that 35% of entities had experienced at least one fraudulent incident during the year, 14% of which were valued at over $1m and half of these, 7%, over $10m. While financial losses were reported in the millions, the majority of establishments had spent less than $50,000 on response plans during the year.
More than a third of the surveyed entities reported that the financial crisis had directly resulted in an increase in the likelihood of fraud.
“Organizations that adapt to the economic conditions and the risks and challenges they bring about have the opportunity to adopt appropriate, effective and sensible solutions. Ultimately, they will have a better chance at recovery, securing their future and ensuring that the Middle East is a paradigm of transparency and good governance.” said Simon Charlton, Managing Director, Forensic and Dispute Services, Deloitte Corporate Finance Limited.
“A key question perhaps is did the crisis actually lead to an increase in the likelihood of fraud or just the uncovering of incidents that previously went undetected in the boom years?” Charlton added.
Survey respondents revealed that theft of physical assets and theft or misuse of information as the most common types of fraud and that fraudulent activity was most likely to take place within the operational parts of the business, information technology department and the procurement function.
According to the survey, 56% of respondents considered internal processes and controls as the most effective methods to detect fraud related incidents. 73% of establishments surveyed confirmed that they had some form of framework in place to prevent and detect fraud in order to minimize fraud related losses. Most respondents identified the existence of multi anti-fraud controls within the organization although they expressed concerns over the effectiveness of these controls.
Participants disclosed that a whistleblowing policy setting out the procedures for reporting fraud exists in only half the organizations surveyed, yet those who had a policy in place identified it as the most effective means to prevent and detect fraud. “Historically, internal and external tip-offs are major contributors to the discovery of fraud and corruption. It is a concern that only 50% of respondents had whistleblower hotlines. In addition to providing an avenue for staff and others to report their suspicions, the fact that an organization operates a hotline assists in defining its culture.” said David Clements, Director, Deloitte Forensic & Dispute Services, Deloitte Corporate Finance Limited.
“While our results illustrate an increased exposure to fraud, they also show an improvement in Corporate Governance standards in the region. Overall, our results are encouraging and indicate that while organizations have experienced a recent increase in fraud related activity, they are focused on continually improving controls and implementing risk mitigation strategies.” said Humphry Hatton, Partner in Charge, Forensic & Dispute Services EMEA Region and Deloitte Corporate Finance Limited Middle East, CEO.
Hatton concludes: “The increasing proactive focus on preventing fraud, waste and abuse from occurring is a move that is being encouraged, welcomed and supported as part of corporate growth in the region and will go a long way to increasing Middle Eastern companies’ competitiveness with their international equivalents. Also, as the region goes through political and economic change, there is an added impetus in some quarters for a move towards greater transparency and accountability.”
