Corporate Espionage

According to a survey carried out by KPMG across a cross-section of top

executives in 800 organizations in different verticals, respondents in the ICE

space feel most vulnerable to corporate espionage. While 84% of respondents in

the ICE sector apprehend espionage attacks on their organizations, the financial

sector comes in second–with 81% fearing attacks.

The high fear factor in these two sectors has been attributed to the

competitive edge of both–resting on intangible assets like databases,

knowledge pool and proprietary information, which are susceptible to espionage.

Numerous security leaks and modern-day hack attacks have made corporate

espionage one of the most serious concerns for the corporate world. Nearly 75%

of those surveyed said that corporate espionage could affect their business in

future.

As a result, 51% of respondents have framed some policies or procedures to

counter corporate espionage. The most common measures were allowing access to

sensitive information on a need to know basis (82%) and restricted physical

access to sensitive areas (79%). Improved IT systems as a way to prevent

corporate espionage was at 55%. Other preventive measures mentioned by

respondents included: review by top management of sensitive information, display

of identification tags for all personnel and visitors, shredding of paper before

disposal, and continuous efforts to build loyalty. The largest number of fraud

were experienced in the retail sector (83%) followed by IT (67%).

In several cases, the fraud was discovered by more than one method. Internal

methods of detection like internal controls (41%) and internal auditor review

(33%) continue to be more effective than external methods with the latter method

being able to discover only 2% of the frauds. Respondents believed that their

organization was defrauded due to poor internal controls (51%), followed by

collusion between supplier and vendor particularly in the manufacturing sector,

employee and management (40%) and background checks of employees and vendors not

being comprehensive (29%).

Respondents have undertaken improved internal controls (57%) and extensive

background checks (58%) as measures to prevent fraud. Organizations who have not

conducted fraud diagnostic reviews seem to be susceptible to the risk of fraud.

This appears to be justified by the finding that 44% of the respondents who

have not undertaken a fraud diagnostic review were victimized by fraud.

Balaka Baruah Aggarwal/CNS in New Delhi