Sector snapshot

Sector snapshot:
Looking for more sector insights?
Check out pwc.com/energy
Energy, utilities and mining
Explore crime survey data at
www.pwc.com/crimesurvey
Asset misappropriation is the most common
type of economic crime in the energy, utilities
and mining sectors but procurement fraud
and bribery and corruption are common too.
Sector executives need to take these systemic
crimes seriously. With 69% of the most
serious crimes committed by insiders, improving
internal controls will be critical. And with
many companies operating in high corruption
risk markets, they’ll need take action to cope
with relevant risks.
Top types of
economic crime
in the energy,
utilities and
mining sectors
reported at higher rates – and that’s worrying, because
while economic crimes related to a specific episode certainly
cause losses, systemic economic crimes can have a more
far-reaching impact. Not only can enforcement of these crimes
lead to substantial fines and a black mark on your reputation,
they can cause lasting damage. They can contribute to an
increases exploitation of weaknesses in internal control structures. Episodic crime
energy, utilities & mining sector is one of the industries most
Economic crime is on the rise
affected. The crimes reported are happening throughout
This year 31% of the energy, utilities and mining
the entire process, from the invitation of bids, through
respondents we surveyed reported that their companies
vendor selection and vendor contracting, and during the
experienced an incident of economic crime, up slightly
payment process.
from 29% in 2011. The good news: slightly fewer sector companies are experiencing economic crime, compared to the
The rate of bribery and corruption is far higher in the
global average. But the bad news is that for energy, utilities
energy, mining and utilities sector compared to the sample
and mining companies who did face fraud, direct financial
overall. It’s a continuing problem – significant numbers
losses of over $1 million were more common.
of industry respondents expect to face an incident over the
And that’s not including indirect losses from damage to
next year (37%). That’s underscored by the high rate of
corporate reputation, partner relationships and
employee fraud – 69% of energy utilities and mining
employee morale.
respondents experiencing economic crime said the most
Asset misappropriation is the most common type of
economic crime in the energy, utilities and mining industry.
More than three-quarters of those experiencing economic
crime report it, higher than the average overall.
Global Economic Crime Survey 2014
serious incident was perpetrated by an internal actor.
There’s some good news, though. More serious economic
crimes were detected by whistle-blowing than across the
sample as a whole. That suggests cultural efforts may be
taking hold.
Asset misappropriation
$$
$
environment that erodes the integrity of employees and
Procurement fraud is a new category this year, and the
76%
Systemic crime
Base: 119 energy, utilities and
mining respondents who
experienced economic crime
in the past 24 months
43%
Procurement fraud
$
$
Procurement fraud and bribery and corruption were also
42%
Bribery and corruption
Sector snapshot:
Looking for more sector insights?
Check out pwc.com/energy
Energy, utilities and mining
Explore crime survey data at
www.pwc.com/crimesurvey
Many high growth markets
are high risk too
Some of the elevated rate of bribery and corruption may
be related to where sector companies are doing business.
Indeed, 70% of energy, utilities and mining executives
see corruption and bribery as the highest risk to doing
business globally, compared to 53% of respondents overall.
More than half (56%) of energy, utilities & mining
companies are already operating in high corruption
risk markets.
Many of these represent important and growing markets –
43% of energy, utilities and mining respondents say they
70
%
of energy, utilities and
mining companies see bribery
and corruption as the biggest
risk to doing business globally
Energy, utilities and mining
companies are changing the way
they do business to better cope
with corruption risk
have pursued an opportunity in a high risk market this year.
But the challenges involved are daunting; 44% of these
respondents report that they had to alter their business
plan or strategy in response to corruption risk.
How are they changing their business strategies to cope?
There’s no one answer. As is true across the sample,
additional due diligence is by far the most common response.
Adding contractual terms or providing additional training
to staff are also popular choices. And for more than a third
of companies, walking away from the opportunity was
judged the best solution.
Perform additional due
diligence procedures
Add
contractual terms
Provide additional
training to target’s
employees
Walk away from
the opportunity
Force adoption of
accounting system
71%
47%
40%
36%
21%
Base: 72 energy, utilities and mining respondents who have changed strategies
in response to high corrpution risks
Global Economic Crime Survey 2014
Let’s continue
the conversation
. Do you have robust controls for procurement
processes like vendor selection and contracting?
. How strong are your internal control structures?
. How are you adapting business plans to combat
economic crime in high corruption risk markets?
Norbert Schiweters
Global Energy, utilities and mining leader
Tel: +49 211 981-2153
Email: [email protected]
© 2014 PwC. All rights reserved. PwC refers to the PwC network and/or
one or more of its member firms, each of which is a separate legal entity.
Please see www.pwc.com/structure for further details. This content is for
general information purposes only, and should not be used as a substitute
for consultation with professional advisors.