PwC Crime Survey - 25% of companies in Hungary are victims of economic crime
Date: 29th November, 2005
PricewaterhouseCoopers Global Economic Crime Survey - conducted every two years - is one of the most comprehensive assessments of the nature and impact of fraud around the world.
Economic crime poses a significant threat to companies, with one in four of organizations in Hungary being victims of fraud in the past two years, according to the PricewaterhouseCoopers Economic Crime Survey 2005.
The biennial survey involved more than 3,600 companies in 34 countries, including 75 leading companies in Hungary. Our 2005 economic crime survey reveals that 25% of companies surveyed in Hungary reported being subject to one or more serious economic crimes during the previous two years. Although this is significantly lower than the global average (45%), over the past two years Hungarian respondents had suffered a shocking 8.8 cases of fraud on average, which is higher than for the CEE as a whole and global figures.
Most frequent types of economic crime
The highest numbers of reported frauds in this survey are in the categories of false pretences and asset misappropriation (i.e. theft), although companies surveyed in Hungary believe that asset misappropriation and false pretences are far less common than they actually are. Conversely, the perception of corruption and bribery continues to be significantly higher than the reported incidence of these crimes.
The cost of economic crime
The average financial damage to Hungarian companies from tangible frauds was over USD 800,000. 17% of Hungarian companies surveyed had losses in excess of USD 1 million. The highest reported losses resulted from false pretences. On average companies managed to recover only 32% of the amount lost.
However, the damage inflicted by economic crime goes far beyond direct monetary loss, with 48% of Hungarian respondents reporting some "collateral" damage relating, for example, to their image, brand, reputation, business relationships, and staff morale.
Profiling the fraudster
The bitter experience of 58% of Hungarian companies that reported a fraud was that the fraud perpetrators were from among their own staff. While disappointing, this is not surprising, as fraudsters operating within a company have a strong understanding of the business, including the strengths and weaknesses of the controls in place to prevent fraud. It is worth noting that the percentage of internal perpetrators reported in Hungary (58%) was considerably higher than in the CEE region as a whole (28%).
The typical perpetrator in Hungary was male (95%), between the ages of 31 and 40 (45%). 50% of fraudsters were educated to university degree level. While fraud is perpetrated by all levels of staff within companies, what is startling is the extent to which our survey showed members of middle and senior management - the figureheads within a business - are involved in frauds.
Tip of the iceberg?
What causes concern is the fact that nearly a third of the frauds reported in the survey were detected by chance or tip-offs. If chance is a major variable in the detection of fraud, a concern remains that known crimes may only represent the "tip of the iceberg" and that many other frauds remain undetected. Despite the growing confidence that the corporations surveyed have in their risk management systems, accident plays as much a role in detecting frauds as internal audit (both at 29%), which is the single most successful control/process in detecting incidents of fraud.
Illusion of safety
While 69% of the surveyed Hungarian companies feel it is unlikely that their organisation is at risk of being subject to economic crime over the next 5 years, this apparent feeling of security may be an illusion, and even a sign of over-confidence. The fight against fraud is a constant struggle. Companies must not drop their guard, but must constantly develop controls and build on the loyalty of their employees to insure that, even if it is impossible to eradicate fraud, they do not provide an environment in which it can flourish.
ENDS
1. PricewaterhouseCoopers Global Economic Crime Survey 2005 was conducted on behalf of PricewaterhouseCoopers and the leading criminological scholars at Martin-Luther University, Halle-Wittenberg by TNS-Emnid in Germany.
The global survey was conducted in 34 countries between May and September 2005. Over 3,634 computer-assisted telephone interviews were conducted with CEOs, CFOs and other executives who claimed responsibility for crime prevention and detection within their respective companies. More than half of the respondents (52 percent) are members of the executive board or company management; 43 percent stated that their main responsibility was in the field of finance.
The companies were randomly selected with preference given to the 1,000 largest companies of a country and the target number of respondents for each country was determined according to its GDP. 75 companies were interviewed in Hungary.
2. PricewaterhouseCoopers Dispute Analysis & Investigations practice operates across over 50 countries, including Hungary, and can deploy experienced and knowledgeable teams to manage and mitigate the threat of corporate crimes and achieve the best possible outcomes. Using in-depth forensic accounting and corporate investigation skills allows clients to continue their business, recover lost funds, and halt further economic losses. The expertise to assist organisations investigate and manage the many risks associated with fraud, abuse and dishonesty comes from the experience of the international staff and their backgrounds in forensic accountancy, forensic IT and private sector investigations as well as regulatory work and law enforcement.
PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services for public and private clients. More than 130,000 people in 148 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders.
"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
