Mumbai: Companies in India are ill-equipped to tackle crimes committed in the virtual world such as e-commerce, social media, cloud computing, virtual and cryptocurrency frauds, the Deloitte India Fraud Survey Report said on Tuesday.
A rise in corporate fraud over the next two years could outpace corporate India’s efforts to mitigate it, the report said.
“The online world is the biggest worry for India firms because adequate steps are not being taken to prevent frauds in the virtual world,” said Sumit Makhija, senior director at Deloitte India, a consultancy firm.
The survey, conducted by Deloitte’s forensic wing in India in September, covered over 400 top management officials across sectors working in the area of fraud risk management.
Around 56% of the executives surveyed said incidents of fraud will continue to rise over the next two years, with at least 88% of them saying the new companies law could help reduce instances of fraud in the future, according to the report.
The new companies law has made it mandatory for listed companies to form a vigilance mechanism and has fixed greater accountability on board members and directors to detect and prevent fraud.
Indian companies, the study said, remain highly vulnerable to fraud in the absence of sufficient mechanisms to “prevent and detect fraud, as well as limited enforcement of internal controls”. The report said that only 28% of the executives surveyed have not faced any fraud in the last two years.
Only 44% of the respondents said they had incurred losses due to fraud of less than Rs.1 crore over the last two years. Interestingly, the executives surveyed said the senior management of firms are “most susceptible” to commit fraud, whereas external parties were least likely to do so.
“Corporate India has traditionally taken a reactive approach to mitigating fraud and complying with regulatory requirements. However, with organizations being exposed to new frauds and a changing regulatory environment, a proactive approach is the need of the hour. Companies need to make investments towards putting in place systems and processes aimed at curbing fraud in the long term,” said Rohit Mahajan, senior director and head, Deloitte Forensic (India.)