Respondents to this year’s survey on economic crime conducted by PwC Hungary reported a 100% increase in fraud – which means that half of the Hungarian companies surveyed experienced this type of economic crime in the past 24 months. But this result is somewhat misleading: it is more likely that it shows a growing awareness of fraud, rather than an increase in actual incidents.
In our survey, we collected responses from 7,228 organisations from 123 countries, including 71 leading companies within Hungary. This year, 49% of global organisations said they had been victims of fraud or economic crime. In Hungary, this percentage is even higher: 51%.
Asset misappropriation (42%) remains the most common type of economic crime in Hungary, followed by fraud committed by consumers (39%), cybercrime (31%), and business misconduct (28%).
Our survey shows that many companies are underprepared to face fraud, for both internal and external reasons. That is why a clear understanding of what constitutes fraud – and what measures need to be taken to prevent it – must be shared across the organisation. The time is right for organisations to adopt a new, more holistic view of fraud. One that recognises the true shape of the threat: not merely a nuisance or a cost of doing business, but a shadow industry.
“The high proportion of Hungarian respondents who are unsure if their respective organisation had been asked to pay a bribe (44%), or had lost an opportunity to a competitor they believed paid a bribe (58%) in the last 24 months, is worrisome and gives reason for serious concern. This also clearly illustrates the hidden nature of corruption – this is why we consider corruption to be a genuine blind spot in Hungary,” said Csaba Polacsek, Advisory Partner at PwC Hungary.
One of a company’s biggest threats is often to do with the people it does business with. The survey shows that the main perpetrators of the most disruptive fraud at Hungarian companies were external actors (58%), which is a notable change from our previous survey (33%). Even when the fraudster was external, a sizable percentage of that external group includes “frenemies” of the organisation – agents, vendors, shared service providers, and customers.
Cybercrime is long past its infancy and adolescence, and has increased significantly compared to our last survey in 2016 – it is ranked the third most frequently committed crime. Thirty-one percent of respondents experienced cybercrime-related fraud, so now Hungary is on level with the global results. This is also the area where we measured the strongest growth.
Cybercrime occurs in various forms – in Hungary, malware (44%) and phishing (37%) seemed to be the most common. There is growing awareness of this threat among Hungarian companies, which is reflected by the increasing number of incident response plans to deal with cyberattacks. Compared to the 42% reported in the 2016 survey, this year, 72% of respondents said their companies have an incident response plan to thwart cyberattacks, while 10% have no such plan and are not even considering implementing one.
“Chief executives are increasingly seen as the personal embodiment of an organisation, expected at all times to have their finger on the pulse of every facet of its culture and operations. So, when ethical or compliance breakdowns happen, they are often held personally responsible – both by the public and, increasingly, by regulators,” Csaba Polacsek added. This is demonstrated by the fact that according to 17% of Hungarian respondents, the CEO has primary responsibility for their organisation’s ethics and compliance programme.
However, 21% of economic crime was still detected beyond the influence of management in Hungary.
Direct monetary losses due to fraud can be substantial: 45% of organisations that suffered economic crime have lost more than USD 100,000 (approximately HUF 25 million) in Hungary. When it comes to defence against fraud, organisations today have access to a wealth of innovative and sophisticated technologies, aimed at monitoring, analysing, learning and predicting human behaviour.
PR Manager, PwC Hungary