For the seventh year running, The Economist Intelligence Unit, commissioned by Kroll, surveyed senior executives from around the world across a wide variety of sectors and functions. The results of our 2013 report reveal a number of key insights:

1. The incidence and costs of fraud rose markedly in the past year, in turn driving up companies’ sense of vulnerability.

According to this year’s survey, the level of fraud increased by every measure in the past 12 months, reversing recent trends. Overall, 70% of companies reported suffering from at least one type of fraud in the past year, up from 61% in the previous poll.

The damage occurred in a wide variety of ways. Every kind of fraud covered in the survey saw an increase in incidence, with vendor, supplier or procurement fraud and management conflict of interest seeing the biggest growth.

2. Information-related fraud is common and evolving, but many companies are not prepared if things go wrong.

Information theft remains the second most common fraud, affecting more than one in five companies over the past year, and three-quarters of respondents describe their businesses as at least moderately vulnerable. Looking ahead, complex IT structures are the most commonly cited reason for an increase in overall fraud exposure (named by 37% of respondents), suggesting that there will be no quick diminution of the threat. 

Despite growing concern about information theft and the evolving nature of the threat, preparedness is far from universal. Of those surveyed, 68% say that they currently invest in some sort of IT security, which raises the question of how exposed the other one-third might be.

3. Fraud remains an inside job, but so does its discovery.

As reported in our earlier surveys, fraud is typically carried out by employees within the company. Overall, 72% of those surveyed say that their company has been hit by a fraud involving at least one insider in a leading role, slightly up from 67% last year.

However, this year’s survey also shows that most types of fraud are discovered internally. Management's discovery of the crime was the most common reason for it coming to light, playing a role 52% of the time when a fraud was exposed, followed closely by internal audits (51%). Only in 10% of such cases did an external audit play a role.

Surprisingly few companies, however, are cultivating whistle-blower programmes. Only 52% of those surveyed report that they have already invested in staff training about fraud and the creation of whistle-blower hotlines, and just 43% say they intend to increase their investment in this area in the coming year.

4. Global business practices often increase fraud exposure.

Globalisation has made companies more focused on areas where they have a strategic advantage, while finding ways for others to do the rest through outsourcing or partnerships.

Less appreciated is that these shifts, however profitable, lead to a higher risk of fraud in a variety of ways. For example, 30% of respondents report, that entering new, riskier markets has increased their exposure to fraud in the past year.

The dangers of new business norms are feeding into other fraud figures. Of the companies that were hit in the past year and where the perpetrator was known, 30% suffered at the hands of vendors or suppliers and 11% at those of their joint-venture partners.

Given the high level of risk, a surprisingly small proportion of companies are taking action. Only 43% intend to invest in greater due diligence for partners or vendors over the next 12 months. One of the reasons may be that, in the search to reduce costs—a permanent feature of global competition—fraud prevention can get left to the side.

5. Those with local knowledge see fraud risks everywhere.

Certain regions have a reputation for high levels of fraud. It comes as no surprise, therefore, that 13% of all respondents were dissuaded in the past year from operating in Africa, and 11% in Latin America, from their experience or perception of fraud. 

More striking is the degree to which fraud is keeping companies from making local investments, even in regions where the problem is thought to be relatively well controlled, particularly North America.

To download the full report, click here.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.