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PricewaterhouseCoopers: 41% of Bulgarian Companies are Victims of Economic Crime

January 13, 2006
PricewaterhouseCoopers: 41% of Bulgarian Companies are Victims of Economic Crime

Nearly half of all business organisations have become victims of fraud in the past two years, the PricewaterhouseCoopers' Global Economic Crime Survey 2005 states. Specifically, 41% percent of Bulgarian companies experienced fraud in the past two years.


The biennial survey involved 3,634 companies from 34 countries including Bulgaria and was conducted in association with Germany's Martin-Luther University, Halle-Wittenberg.


According to it, the number of companies reporting fraud increased globally from 37 percent to 45 percent since 2003. The cost to companies was an average USD 1.7 million in losses from "tangible frauds", those which result in an immediate and direct financial loss. In Bulgaria, 15% of the companies surveyed reported losses in excess of USD 250 000.


This year additional research has been commissioned to enable a separate survey report on Bulgaria. This is based on 75 interviews with senior executives of large Bulgarian companies. Bulgarian respondents, on average, reported suffering four fraud incidents since 2003, compared to eight cases reported by companies around the world. Regardless of size, no company or industry, regulated or unregulated, was immune from fraud.


The level of actually reported corruption cases by the participants in the survey is significantly lower although this continues to be perceived as the most prevalent type of fraud in the country. The most common types of fraud encountered by respondent companies were asset misappropriation (68%) and false pretences (52%). This is not surprising, as these are among the easiest frauds to detect.


In addition, counterfeiting (including product piracy and industrial espionage) is a more serious threat that many business leaders anticipated. One in every 5 reported frauds occurred in this area. This suggests that greater management priority needs to be placed on safeguarding corporate trademarks and key business information.


Apart from the financial losses, 57 percent of the Bulgarian companies surveyed reported suffering "collateral damage" to the day-to-day operations and success of their businesses. Of those, 71 percent suffered damage to their relations with other businesses (including suppliers and contractors); 29 percent to their brand; and 14 percent to staff morale.


In Bulgaria, internal audit remains the most successful control by detecting 30 percent of the cases of economic crime; however 25 percent of cases were detected by accident.


On average, Bulgarian companies managed to recover only 28 percent of amount lost. 47 percent of respondents indicated that they had not recovered any funds from the amount lost.

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