KUALA LUMPUR, 24 April 2014 - Despite all the attention that fraud, corruption and other forms of economic crime receive, Malaysian businesses are still underestimating its severity and threat. According to PwC’s Malaysian cut of the 2014 Global Economic Crime Survey, 47% (37% globally) of our respondents said they either have not undertaken a fraud risk assessment in the last two years, or did not know if they have. Worse, 38% (30% globally) of those who hadn’t taken an assessment said they were not sure what a fraud risk assessment involves.
Yet, of those that have experienced some form of economic crime, 58% say the number of occurrences and size of crimes have increased. This shows that despite growing awareness of economic crime, organisations may need to do more to protect themselves.
Malaysian organisations may also be underestimating the threat of corruption, both domestically and in international markets. 32% of respondents did not know if their organisation had been asked to pay a bribe, which we believe is too high a level. 35% of our respondents say that they have operations in countries in markets that are rated by Transparency International as having a high level of corruption risk. When asked how likely it was that they would experience bribery and corruption in the next 24 months, 38% responded that it would be “likely”.
31% of our respondents said they have experienced cybercrime, a drastic increase from our 2011 results of 5%. Of those, 9% believe that they have suffered financial losses of more than US$1 million. Also, 40% of our respondents said their perception of cybercrime risk at their organisation increased. This figure is, however, lower than the global average response of 48%. Are Malaysian businesses underestimating this threat or is the rest of the world over stating the risk?
“Why are Malaysian organisations and leaders underestimating the effects of economic crime on their own businesses? As awareness of these crimes increase and technology develops, companies may have a false sense of security, believing they’re well protected with the controls and processes they have in place. However, fraudsters are increasingly sophisticated and may be a step ahead,” said Dato’ Mohammad Faiz Azmi, Executive Chairman, PwC Malaysia.
He continued: “The organisation that can stay agile, aware and up-to-date will be better placed to prevent and detect economic crime. Malaysian businesses must remember that what you don’t know can hurt you.”
Based on our survey responses, Malaysia’s typical internal fraudster is:
There has been a significant drop in the number of internal fraudsters (46% in 2014, 59% in 2011) and an approximate corresponding increase in frauds committed by external parties (50% in 2014, 39% in 2011). This could partially be due to the increasing incidence of cybercrime, which opens up doors to external fraudsters.
Fraud detection can usually fit within three categories:
We were surprised to see so few of the frauds being detected by the use of forensic data analytics (0%), fraud risk assessments (23%) and whistleblower hotlines (8%).
These are clearly areas that need to be beefed up.
“Forensic data analytics allows an organisation to mine their huge volumes of financial data to find weak spots where fraud and corruption could cover. It also allows organisations to identify inefficiencies and business improvement opportunities. Many Malaysian organisations are currently reluctant to use data analytics because they don’t understand its benefits, which is a missed opportunity,” said Alex Tan, Executive Director and Forensics Lead for PwC Consulting Services Malaysia.
The 2014 Global Economic Crime Survey was completed by 5,128 respondents from 95 countries between August and October 2013. Of the respondents, 50% were senior executives, 35% represented publicly listed companies, and 54% were from organisations with more than 1,000 employees.
110 respondents from Malaysia completed the survey. Of these Malaysian respondents, 25% were from the ‘C-Suite’ with a further 45% being other senior executives such as Head of HR, Head of Department and Head of Business Unit. Listed companies accounted for 38% of the Malaysian respondents, and 39% were from organisations with more than 1,000 employees.
For more information: http://www.pwc.com/economiccrime
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