China: World's Highest Risk for Fraud

It's not easy doing business in China -- just ask local executives in the Middle Kingdom.

Commercial investigative firm Kroll has found some interesting numbers.

73 percent of China-based executives are affected by fraud, up 6 percent from last year. China is the most vulnerable in nine out of 11 types of fraud types, making these executives the most afraid of risks of fraud than anywhere else in the world. The annual survey interviewed 768 senior executives worldwide.

Other numbers:

87 percent of Chinese executives say they are vulnerable to theft of physical assets or shares, much higher than the global average of 62 percent.

81 percent of Chinese executives worry about theft of their corporate information, compared to the global average of 51 percent.

81 percent of Chinese executives worry their companies will face the risk of corruption and bribery, compared to the global average of 40 percent.

Other risks:

74 percent worry about cheating by suppliers;

71 percent about having intellectual property stolen;

69 percent about internal fraud;

69 percent misappropriation of company funds;

65 percent conflict of interest;

65 percent regulatory compliance;

64 percent market collusion;

63 percent money laundering.

The global average for the above numbers is between 26-49 percent.

It is also interesting to add that Kroll found 35 percent of Chinese executives surveyed had invested in staff due diligence, considering 72 percent of fraud causes are because of insiders.

And only 53 percent of Chinese executives hired companies to do due diligence on their partners or vendors even though 74 percent of them felt vulnerable to fraud by vendors and suppliers.

What does this say about China?

There isn't much of a culture of corporate governance, and how it is important to have internal controls.

Wonder how Chinese executives manage to sleep, if at all...

Brazen Theft

A coat like this was stolen on Wednesday

On Wednesday evening a daring shoplifter walked out of the Burberry store in Tsim Sha Tsui with an almost HK$1 million alligator skin coat.

Security cameras show a Chinese man in his 30s or 40s taking the jacket off the mannequin and walking out out of the three-story store within a minute.

Shop assistants were apparently busy with other customers that they didn't realize the very expensive coat was missing until they were doing stock taking at closing time.

The report is gobsmacking on two counts. First is that according to a police source, some designer brands do not like putting security tags on their merchandise.

The Burberry store on Canton Road in  Tsim Sha Tsui

"They think it will ruin their design and damage their brand name," the source said. "They rely on surveillance cameras and security personnel."

And in Tsim Sha Tsui, the source added, luxury stores report on average two to three thefts per month. "They are opportunists and usually act alone. They target designer goods that do not have security tags."

Burberry in Hong Kong is not commenting on the matter, saying it is under investigation, but one has to wonder... losing a HK$995,000 ($128,276) coat surely should be something closely watched?

But secondly -- who needs an alligator skin coat that is worth the amount of two years' rent for a place around HK$40,000 a month?

The theft of the expensive coat illustrates there are shoppers out there who can easily afford an item like this, and those who obviously would not because they don't have decent living conditions or enough food to eat.

A coat like that would easily be spotted when worn in Hong Kong so it must have already been taken out of the city and sold in the mainland where tastes are, shall we say, more extravagant?

Or is this a new trend where shoplifters procure items for people for a fraction of the price tag?

In any event, it's quite amazing a shop would have an almost HK$1 million coat for sale, and another for a shoplifter to brazenly walk out with the coat without anyone watching.

Hong Kong never ceases to amaze.