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Biz fraud risk rises in recession-hit Europe

June 15, 2009 18:33 IST

Thanks to the deepening recession, the tendency to commit business fraud seems to be on the rise in Europe and one-fourth of individuals are even fine with the idea of bribing for getting work.

Moreover, many feel that distorting the company's financial performance is 'justifiable' in the current economic turmoil.

The latest European Fraud Survey by global consultancy firm Ernst & Young revealed that 'unethical business behaviour' is gaining more acceptability.

"Half of those surveyed thought that one or more types of unethical business behaviour was acceptable, including 25 per cent who thought it fine to give a cash bribe to win work.

"There was even a significant minority -- 13 per cent of senior managers -- who felt that distorting their company's financial performance was justifiable to survive today's turbulent economic climate," E&Y said.

Over 2,200 individuals in major companies spread across 22 European countries were surveyed.

E&Y pointed out that economic downturn exposes more fraud and added that as the pressure intensifies on management to maintain income and earnings, "the incentive to commit fraud increases".

More than half of the respondents anticipate corporate frauds to increase in the next few years while only eight per cent of them believe that such instances to decline.

"Making cash payments to win business, and even deliberately misstating financial performance to mask disappointing results were supported by alarmingly large numbers of respondents," Ernst & Young Global Fraud Investigation & Dispute Services Leader David Stulb said.

According to the survey results, the senior management of companies are in fact part of the problem.

"Some 69 per cent of respondents had cause to doubt the integrity of their company's management.

"As a result of this mistrust of management. . . employees expect regulators and other authorities to do more to protect  them and to ensure their bosses are compelled to intensify their efforts to defend companies from fraud," the statement said.

Majority of the European economies are deep in recession and are exploring ways to tackle the raging financial turmoil.

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