Fraud down for construction firms, but average loss still $6.4M

November 01, 2009 |

The global construction, engineering, and infrastructure industry saw a significant decline in fraud activity, with companies losing an average of $6.4 million over the last three years, according to the Kroll Annual Global Fraud Report. The new figure represents less than half of last year's amount of $14.2 million.

Construction, engineering, and infrastructure companies registered a below average loss compared to other sectors, with the financial services industry being hit hardest by fraud over the past 12 months. The findings are the result of a survey Kroll commissioned from the Economist Intelligence Unit of more than 700 senior executives worldwide.

Although fraud losses are down in this year's survey for construction companies, the prevalence of the problem is not declining at nearly the same rate. More than nine out of ten (91%) companies reported being hit by some form of fraud over the past three years, down slightly from last year's figure (95%) but still well above the survey average (85%).

Interestingly, the types of fraud incidences are changing, with more than a third of companies suffering from corruption and bribery (38%), up from last year's survey (28%). Other areas of frequent loss are: theft of physical assets or stock (36%); financial mismanagement (29%); vendor, supplier, or procurement fraud (25%); information theft, loss, or attack (23%); regulatory or compliance breach (23%); and management conflict of interest (21%).

Other key findings include:

  • The Middle East and Africa experienced the worst fraud levels of all the regions, with companies losing an average $11.5 million.

  • North America was no longer the low fraud leader, with seven out of 10 fraud incidences up from 2008 figures. Companies experiencing internal financial fraud and financial mismanagement rose substantially; theft of physical assets, corruption, and vendor fraud were lower than any other region.

  • Larger companies with annual sales of more than $5 billion reported greater average losses (up to $25.8 million from $23.3 million in 2008).

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