China business leaders see social media as a growing risk

Adversarial social media activity was a relevant factor in 39% of significant fraud and theft incidents suffered by businesses in China in the last 12 months; above the 27% global average. This is according to data from the 2019 Global Fraud and Risk Report released today by Kroll, a division of Duff and Phelps, the global player in risk mitigation, investigations, compliance, cyber resilience, security and incident response solutions. 

Over half (55%) of China business leaders (versus 63% global average) surveyed cited social media as a significant priority when developing a defence strategy for their organisations. The report reveals firms now face an even wider risk landscape as organisations seek to tackle emerging digital threats and deal with complex reputational and regulatory issues. 

Kroll’s annual Global Fraud and Risk Report, with research conducted by Forrester Consulting, examines the current global risk landscape and analyses the biggest risks facing global companies and steps being taken to prevent, detect and respond to daily threats.

Violet Ho, Senior Managing Director and Head of the Greater China Business Intelligence and Investigations practice of Kroll, a division of Duff & Phelps, commented: “China’s emergence as a critical link in the global value chain means that businesses operating there are prime targets for a variety of threats that are often more pronounced than anywhere else in the world. While intellectual property theft, leaks of internal information and data loss continue to be risk management priorities, there is a growing tide of other issues impacting organisations in China.”

Suffered by 48% (versus 39% global average) of businesses, are internal information leaks highlighting the growing internal threat to intellectual property, trade secrets and other confidential information. In last year’s survey, information theft, loss or attack were the top three most prevalent type of frauds experienced, with 28% of respondents reporting being affected by these types of incidents.

Data theft and reputational damage caused by third-party relationships were significant incidents, with 39% and 30% of respondents respectively affected this year. External fraud in China ranked at 18%, which was lower than the global average of 28%. This low rate may be attributed to the fact that fraud goes undetected for significant periods of time in China.  

When it came to geopolitical risks that have affected organisations in China, respondents said new tariffs or trade wars had the biggest impact (76%) in the last 12 months followed by restrictions in foreign investment (70%), and changes in economic treaties (67%). 

Today’s business environment continues to present challenges to businesses in terms of risk mitigation and reputation management. As such, the majority (85%) of businesses feel threatened by market manipulation through the spread of fake news, most commonly fuelled by social media.  

A greater share of organisations in China than anywhere else say they use brand ambassadors or social media influencers frequently or always (54% vs. 32% globally). Hence, it’s not surprising a third of companies in China reported experiencing adversarial social media activity (39% vs. 27% globally).

Additionally, brand ambassadors and influencers present a new challenge for due diligence procedures; 62% of survey respondents use them frequently or always, meaning businesses are having to vet not only the influencers themselves but also their wider digital networks.

The research highlights that businesses need to ensure they anticipate this broad range of threats and detect them effectively before they escalate into bigger issues. The majority (85%) of businesses felt their cyber risk detection mechanisms were effective, but when asked about future threats, 85% of respondents said they’re somewhat concerned about a cyberattack resulting in a global economic crisis. 

Interestingly, internal whistleblowing programs were deemed the least effective way to detect risk among a list of other programs, with only 70% (66% global average) of business leaders in China stating they were effective.