Strategy & Leadership

Natural resources

Africa

Africa

Fraud presents a big challenge to the natural resources industry.

  • Companies consider themselves most exposed to corruption with nearly one-quarter ranking their firms as highly vulnerable, which is almost double the average. One in five puts themselves in the same category with respect to information theft.
  • The loss per company during the past three years has been US$11.5m, more than 70% higher than the average.
  • The prevalence of corruption, which is reported by 20% of firms in this sector, is very close to the average of 19%, while the prevalence of information theft, which is reported by 15%, is well below the average of 22%.
  • Businesses in this industry are more likely than average to face issues of theft of physical assets, which has been experienced by 39%, management conflict of interest, experienced by 31%, or regulatory breaches, experienced by 24%. Perceived vulnerability in these areas, however, is roughly similar to that of the survey average.

The sector’s willingness to address a range of threats limits damage.

  • For nine out of the ten anti-fraud strategies listed in the survey, adoption within the sector was noticeably more widespread than the average, usually by about 10%. Financial controls, for example, were used by more firms to combat fraud than any other sector, including financial services.
  • A higher than average proportion of natural resource firms was also planning additional investment for seven out of the ten strategies. Protection of physical assets – theft of which represents the most common problem – will see the most widespread attention, with 62% of firms spending here. This is well ahead of the 45% average.

Despite the high cost of fraud per company, these efforts by the sector are having some positive effects.

  • Thirty-four percent of companies report suffering no fraud at all within the past year, which is well ahead of the overall average of 19%.
  • Fraud exposure has stayed constant or declined at 28% of firms, compared with 18% for business as a whole.

The high loss per company, spread over a relatively low proportion of firms actually affected by fraud, indicates that, when something goes wrong in this sector, it is extremely costly. Some firms may need to increase their already above-average efforts, and it is possible that they could benefit from a deeper understanding of the particular threats they face.

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