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Three-quarters of construction-related companies affected by fraud in the past year

January 19, 2016 By Andrew Smith

Three quarters (75%) of construction, engineering and infrastructure companies have experienced a fraud incident in the past year, according to the 2015 Kroll Global Fraud Report.

The findings reveal the most common type of fraud experienced in the sector was theft of physical assets or stock, experienced by 36% of construction companies, followed by vendor, supplier or procurement fraud (24%). These are some of the highest incidence rates of any sector surveyed and are second only to levels experienced by the retail industry. Respondents in this sector also reported the highest level of regulatory or compliance breach fraud (18%) of any sector surveyed.

Nine in ten (92%) respondents in the construction industry say their exposure to fraud has increased in the last year, the highest increase in fraud exposure of any sector. The biggest drivers of this are high staff turnover (49%) and entry to new, riskier markets (21%). In terms of responsibility, a senior executive or middle manager was involved in a fraud against the company at just under a third (32%) of all construction firms surveyed.

Despite problems caused by high staff turnover, only 30% of construction companies are looking to invest in background screening in the coming year and just 25% plan to spend on management controls – less than the survey average.

Percentage of construction, engineering and infrastructure companies affected by different types of fraud
Percentage of construction, engineering and infrastructure companies affected by different types of fraud

Daniel Karson, Chairman of Kroll, observed:

“One of the most telling results from this year’s report is how vulnerable to fraud companies are feeling. In one form or another, the specter of fraud arises in virtually every business relationship. What our report drives home is that fraud is often an “inside job” and that companies must address both internal and external relationships if they are to most effectively protect their money, property and private data.

“While technology has enabled new ways to perpetrate fraud, our daily work with clients confirms what the report also reveals — that old fashioned theft, bribery and kickbacks are still amazingly effective and pervasive. Human nature being what it is, fraud will always be with us, whether it occurs in a company’s corner office or a world away in its supply chain. However, there are numerous strategies, resources and best practices available to companies that can go a long way toward helping them protect themselves and their investments.”

The Kroll Global Fraud Report 2015 includes a full detailed industry analysis across a range of fraud categories and regions. To obtain a copy, visit http://www.kroll.com/global-fraud-report.

Filed Under: Contracting News Tagged With: bribery, construction, corruption, engineering, fraud, money laundering, price fixing, procurement, theft

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