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Losses from information theft now exceed physical theft

A new survey of more than 800 executives at firms around the world commissioned by risk consultancy Kroll finds that during 2010 more companies are experiencing greater losses from theft of information—account numbers, passwords, product plans and designs, marketing details, business intelligence, and more—than they are from physical theft of their products, stock, and material assets. According to the survey, some 27.3 percent of companies experienced theft of information or assets in the last twelve months, compared to 27.2 percent of companies that experience physical theft. Information theft shows a proportionate increase of over 50 percent compared to 2009, while physical theft is actually down slightly.

“Theft of confidential information is on the rise because data is increasingly portable and perpetrators—often departing or disgruntled employees—can remove it with ease absent sufficient controls,” said Kroll America’s VP Robert Brenner, in a statement. “At the same time, there is a growing awareness among thieves of the increasing intrinsic value of an organization’s intellectual property.”

Overall, Kroll’s survey sound the the losses businesses experience from fraud on average grew from $1.4 million per billion dollars of sales in 2009 to to $1.7 million per billion in sales during the last 12 months, an increase of more than 20 percent. Other types of fraud on the increase for the year include fraud among vendors and suppliers, as well as losses due to counterfeiting, piracy, and IP theft.

The survey finds that fraud is usually an “inside job,” with junior employees and senior management being the most likely to turn on a company (at 22 percent each), followed by agents and intermediaries (at 11 percent). The proportion of frauds carried out by employees reached 50 to 60 percent in North America, Europe, and the Asia-Pacific region to 71 percent in the Middle East and Africa. However, in Latin America, customers were the most frequent perpetrators of fraud.

The survey also found that concerns over fraud is a negative factor in company’s decisions to pursue business activities around the world, particularly in emerging economies in Africa and Latin America as well as China.

“The results of the survey do not suggest other types of fraud are decreasing,” Brenner said, “but merely that the rise in theft of intellectual capital has outstripped other fraudulent activity that has remained constant.”

Kroll commissioned the survey from The Economist Intelligence Unit, surveying 801 senior executives at companies in North America, Europe, the Asia-Pacific region, Latin America, the Middle East, and Africa.