‘Firms report recession corruption increase’

Fraud and corruption has increased during the recession with Swedish firms harder hit than the global average, a new survey by consultancy firm Ernst & Young shows.

“There are signs that there there trend shows a tendency to increase among the number of firms affected and that more incidents of fraud and corruption have emerged,” said Kenneth Johansson at Ernst & Young in Sweden to The Local on Monday.

Johansson forwarded a theory that internal financial pressures and the need for refinancing have helped to boost the statistics.

“The pressure on companies to perform, at the same time as it will be difficult for them to reach their financial goals, can lead to certain employees to disregard the company’s basic principles and values,” he said.

“Furthermore as firms during a recession are more likely to need to seek further financing then their accounts are subjected to increased inspection, and thus more cases of fraud come to light.”

The survey is the 11th biennial report published by Ernst & Young and involved 1,400 CFOs and heads of internal audit and legal compliance units at 36 major international companies.

Among the firms located in western Europe 21 percent responded that they had been affected, and discovered fraud within their firms. The equivalent figure in a Europe wide survey from 2009 was 10 percent.

The study writes that “measures to mitigate corruption and bribery exposure are

still not standard practice for companies, including those looking to drive growth through acquisitions” as global economies emerge from recession.

Many global firms lack a documented response plan to the discovery of fraud within their business, the report concludes. Kenneth Johansson told The Local that Swedish firms show a lack of engagement in tackling the problem.

“There are indications that in Sweden readiness is lower, as it seems is interest from boards and senior management,” he said.

The report shows that among Swedish firms a third reported problems with fraud and corruption, meaning that Swedish firms were above average globally.

“Nationally fraud and corruption levels are relatively low and so this perhaps lulls Swedish firms into a sense of security, despite the fact that these firms operate in a global international environment,” Johansson said.

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