PwC queried thousands of executives worldwide, including those at 95 leading Hungarian companies, for its Global Economic Crime Survey 2016. The report found unwarranted complacency among firms in this country.
Even though one-in-four Hungarian companies say they have experienced some type of economic crime in the last two years, firms here seem insufficiently aware of the risks – especially when it comes to cybercrime, according to PwC’s analysis of their newly released survey.
Compared to the last issue of the survey the occurrence of cybercrime remained at the same level (17%) in Hungary, whereas globally this figure is sharply higher (32%), according to a report on Hungary produced from PwC’s Global Economic Crime Survey 2016, which was published on February 25. This is surprising and raises red flags that companies in Hungary might have been compromised without even knowing it, according the report.
Increased awareness is needed in a changing business ecosystem in which the vast majority of documents, communication and transactions has gone digital.
As they have done in past years, PwC put together its Global Economic Crime Survey 2016 by surveying business leaders to discover awareness, perceptions and impacts of economic crime. The largest survey of its kind, this year’s study is based on responses from 6,337 organizations in 115 countries, including 95 leading companies within Hungary.
After analyzing the survey results for Hungary, PwC’s experts seemed to feel that Hungarians were not as aware as they should be of economic crime.
“The Hungarian results paint a more optimistic picture than global and regional figures about the incidence of fraud. This could be because some companies have been compromised without even knowing it, while others may be overconfident about the robustness of their existing control environment,” said Csaba Polacsek, Executive Director, PwC Hungary, Financial and transactions advisory services.
While the survey found that the reporting of economic crime in Hungary did not change since the previous year, the analysts did not see this as a reason for complacency. This actually masks a worrying trend - in the context of an evolving risk landscape, organizations might face sophisticated fraud schemes that run undetected for several years, the analysis said. These latent and long-running fraud cases represent the most dangerous and costly threats, it added.
The lack of awareness would seem to be especially acute in the area of cybercrime, as 55% of the respondents in Hungary said that the risk of cybercrime had not changed in the last year.
This underlines the risk of underestimating cybercrime threats in Hungary, the analysis said. If there is one take away from this survey it is the change in perception of cybercrime – cybercrime is no longer just an IT problem, it should rather be considered a fundamental business problem, the report said.
The most common types of ecomic crimes reported in Hungary were misappropriation (46%), bribery and corruption (38%), tax fraud (21%), cybercrime (17%) and procurement fraud (17%).
In general, those committing fraud worked within the company: “The share of fraud is heavily weighted toward of internal perpetrators (46%) compared to external perpetrators (33%),” the report said.
The survey identified the most likely characteristics of an internal fraudster: male, 31-41 years old, has 3-5 years of service with the company and is a university or college graduate.
A good remedy for these problems is the creation of a business ethics and compliance program, as well as a code of conduct. The analysts were glad to report that this is becoming more common in Hungary.
One positive message is that more than 81% of survey participants have a formal business ethics and compliance programme which is in line with the CEE and global average (identically 82%), the analysis said.
Csaba Polacsek, Executive Director, PwC Hungary, Financial and transactions advisory services:
On Economic crime: “In a rapidly evolving economic and technological environment, with the adoption of new business models, increasingly complex and sophisticated forms of fraud are emerging.”
On Compliance: “In terms of compliance, there is still room for improvement for Hungarian companies. It is worth recalling that while compliance does not readily generate revenue, it ultimately affects the bottom line: by assessing and managing risks, it is an important safeguard against losses. Successful compliance also requires involving the broadest possible range of staff already in the implementation phase.”
Tibor Hurton, Forensic Manager at PwC Hungary:
On Detection methods: “Rapid detection of fraud is critical for companies to minimize potential losses. Technological advances offer new techniques to detect fraud and mitigate risks. These techniques include risk-based due diligence, focused fraud and corruption risk management, intelligent fraud monitoring, anonymous ways to report economic crime, and comprehensive fraud prevention measures.”