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.
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