Mar 03, 2020 08:01 +08

Half of Singapore-based companiesimpacted by fraud lost at least US$ 1million

Singapore, 3 March 2020 - Fraud and economic crime rates remain at recordhighs, impacting companies in more ways than ever. PwC’s biennial survey ofbusiness crime reports that these incidents are costing businesses. Close toone in four respondents reflected that the direct financial losses theyexperienced amounted to US$50 million or more, with another 31 per centsaying it was between US$1 million to US$50 million1.

The Global Economic Crime and Fraud Survey examines over 5000 responses

from 99 countries with 92 respondents in Singapore. The latest study markeda record high number of incidents experienced by Singapore-basedcompanies within the past 24 months (42 per cent). Despite the recordnumber in Singapore, it still falls below the global rate of 47 per cent.

Customer fraud tops the list of all crimes experienced in Singapore (at 46 percent), up from 32 per cent in 2018. Businesses in Singapore and globally arealigned that customer fraud and cybercrime (41 per cent) are the mostdisruptive of all the crimes.

Michael Peer, Singapore Forensic Leader, PwC South East Asia Consultingsaid:

“While Singapore remains a safe place to do business, Singapore-basedbusinesses cannot ignore the risks faced in an increasingly global economy.When companies do business across borders, they do not always know whothey are dealing with - this poses third party risks such as the potential forfraud by overseas customers. Businesses must conduct the proper duediligence to understand who their customers are, making sure to considerdetails such as their financial and reputational standing.”

The report also highlights that larger companies in Singapore have reportedhigher occurrences of economic crime as compared to smaller companies. 24per cent more companies with an annual revenue of over US$1 billionreported economic crimes or fraud (53 per cent) as compared to those underUS$500 million (29 per cent).

The perpetrators: Who’s committing the fraud

Fraud hits companies from all angles - the perpetrator could be internal,external or in many instances there is collusion. In the last two years, therewas a clear shift in origin from internal to external.

51 per cent of Singapore respondents said external perpetrators were themain source of their economic crime incidents, a stark rise from 31 per centin the 2018 study. The proportion of internal perpetrators also fell from 54per cent in 2018 to 28 per cent in 2020.

Taking the opportunity to improve

While each fraud incident is stressful for an organisation, it is also anopportunity for a company to improve its control environment.

However, in Singapore, only half of companies (51 per cent) conducted aninvestigation when the incident occured. Also, 69 per cent of respondentsbelieved that they were in a similar or worse position after the incidentcompared to their situation prior to the incident. (28 per cent reflected worseplace, 41 percent in a similar position).

Without a clear understanding of the root cause of the incident, it would bedifficult for companies to take the appropriate measures to manage the riskand be confident that they have put the right controls in place to mitigate therisk of history repeating itself.

Looking at the bigger picture, companies in Singapore were not as wellplaced as their global peers. Globally, only 55 per cent of organisations feltthat they were in a similar or worse place.

Singapore-based companies were also less likely to feel like they ‘acted as ateam’ (47 per cent globally, 38 per cent in Singapore), ‘had access to key datainformation and leveraged it appropriately’ (39 per cent globally, 28 per centin Singapore) and ‘prepared and followed a plan’ (43 per cent globally, 33 percent in Singapore)

Behind the curve

Despite the increase in Singapore-based companies reporting fraud incidents,two in five (39 per cent) of them do not have any formal risk assessment inplace to understand and evaluate their risk exposure.

Without a proper understanding of the risks that the company faces,companies will not be able to effectively develop plans to mitigate andmanage these risks or better allocate resources across the organisation. Since39 per cent do not have formal risk assessments, it is then unsurprising that asimilar number (34 per cent) of Singapore respondents do not haveformalised policies, procedures and controls to manage the incidents. Thereis also a small group of companies (7 per cent) that do not even haveinformal controls in place.

Michael Peer, Singapore Forensic Leader, PwC South East Asia Consultingconcludes:

“Singapore-based entities are still reporting fewer incidents of economiccrime than the global average, but this year’s results should be a warningthat more needs to be done to maintain that position. While informal riskassessments may seem sufficient, this could lead to companies looking in thewrong places and only protecting against the most common crimes, bringingabout a false sense of security.

“A formal risk assessment will allow companies to have a thorough view ofwhere their vulnerabilities lie. Companies can then invest in the right placesto mitigate potentially significant operational, financial or reputationalimpact. As the saying goes, it’s better the devil you know than the devil youdon’t.”

ENDS

Notes:

1. Note that there was a higher percentage of Singapore surveyparticipants who belong to large organisations with revenueabove USD 5 billion.

• Download the report at www.pwc.com/sg/fraudsurvey.• The Global Economic Crime and Fraud Survey examined over

5000 responses from 99 countries between August and October2019. In Singapore, there were 92 respondents.

• Customer fraud is defined as fraud against a company throughillegitimate use of, or deceptive practices associated with, itsproducts or services by customers or others (e.g. mortgage fraud,credit card fraud).

• PwC highlighted the global issue of upskilling in its 23rd CEOsurvey and identified that whilst retraining/upskilling was seenas the best way to close the skills gap, only 18% of CEOs havemade 'significant progress' in establishing an upskillingprogramme. In order to take advantage of what technology cando for your organization, hiring the right people to workalongside new technologies is important. This is apparent evenwhen hiring staff to support advanced technologies such as

artificial intelligence and machine learning to uncover fraud.

About PwC

At PwC, our purpose is to build trust in society and solve important problems.We’re a network of firms in 157 countries with over 276,000 people who arecommitted to delivering quality in assurance, advisory and tax services. Findout more and tell us what matters to you by visiting us at www.pwc.com/sg.

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