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The continued rise of fraud and economic crime is impacting many more Singapore-based companies in more diverse ways, posing difficult questions for organisations: is our risk management programme agile enough to meet the dynamic challenges being thrown up by a globalised business environment? Are we leveraging technology effectively? How are we responding in crisis situations? Are we prepared for the worst-case scenarios?
For over 20 years, PwC’s Global Economic Crime and Fraud Survey has analysed fraud and economic crime worldwide to enable companies to navigate the fraud risk landscape. We encourage you to take this Singapore report of PwC’s Global Economic Crime and Fraud Survey 2020 as a prompt for meaningful reflection. The survey results are a call to action for all local companies to prepare, respond and emerge stronger.
- 42% of companies surveyed (compared with 47% globally) experienced incidents of fraud and economic crime within the past 24 months. This marks another record high for the country.
- Despite the traditionally safe domestic environment, increasing exposure to global trends requires Singapore-based companies to face new threats.
- Concurrently, a less favorable economic environment could also have impacted the observed trend. Typically, challenging economic conditions increase the pressure on employees to meet their key performance indicators, which may push them to commit fraud.
- Heightened vigilance has also led to increased discovery of economic crime, partially motivated by a crackdown on white-collar crime announced by the authorities in Singapore in early 2018.
- The survey results indicate a radical shift over the past two years in the main perpetrator of frauds suffered by Singapore-based companies from internal parties to more commonly being external parties.
- Customer Fraud has been identified as the most prevalent economic crime (46%) followed closely by Cybercrime (41%) and Deceptive Business Practices (26%).
- Addressing these new types of challenges requires a shift in focus from organisations. This may require bringing on board new sets of stakeholders and control mechanisms, especially as both Customer Fraud and Cybercrime are considered by organisations as the most disruptive and serious fraud incidents in terms of their impact.
- 45% of companies globally said that, as a result of the incident that occurred, they felt their organisations were in a better place compared to only 31% of Singapore-based survey participants.
- This is likely driven by organisational responses to fraud. A lower proportion of Singapore-based participants, as compared to the global average strongly agree that their organisation:
- Came together as a team
- Followed a well-developed plan to address the incident
- Had access to key data and information to support investigation efforts
- 49% of respondents did not conduct an investigation after an incident occured. This would typically limit the analysis of root causes of the incident and reduce the effectiveness of other responses.
“Singapore-based entities are still reporting fewer incidents of economic crime than the global average, but this year’s results should be a warning that more needs to be done to maintain that position. While informal risk assessments may seem sufficient, this could lead to companies looking in the wrong places and only protecting against the most common crimes, bringing about a false sense of security.”
Spotlight on Third Party Management: Behind the curve
The substantial increase in external fraud brings under the spotlight risks inherent in dealing with third parties, whether it be customers, suppliers, service providers or contractors. Strikingly, 51% of Singapore-based participants indicate that they do not have a formal risk-based due diligence and ongoing monitoring process in place for third parties. Interaction with third parties brings all manner of risks ranging from Customer Fraud, one of the more prevalent forms of economic crime reported in our survey, to financial risks and the risk of breaching regulatory requirements such as sanctions.
Companies need to consider the risk of doing business with third parties, ideally through a formal risk assessment process and a measured due diligence process that addresses the perceived risks identified in the risk assessment.
The way forward
Prepare
A robust risk management programme, augmented by technology, can help you prepare.
Respond
Understanding the root cause of incidents is critical. This requires adequate preparation so as to be able to conduct a robust investigation.
Emerge Stronger
When fraud strikes, seek opportunities for forward-looking transformation on the back of the intelligence garnered during the response.
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