Bosses need to keep their focus if they are to limit the impact of the grimmer economic conditions, KPMG has warned.

It says managers who have taken their eye off the ball in relation to managing large scale outsource arrangements, joint ventures and overseas businesses, could be leaving themselves open to not only the risk of costly inefficiencies, but also the threat of fraud and accounting errors - any of which could result in terminal damage to a business.

Mike Froom, director at KPMG in Birmingham, said: "For some time now we have enjoyed economic growth which has provided businesses with a strong platform from which to develop and expand their operations.

"Whether that is in relation to expanding overseas or a structural rethink that has led to outsourcing elements of their operation.

"However, the UK economy appears to be heading for a slower period of growth and as a result, any weaknesses in controls or processes within a business, especially in relation to operations that are geographically dispersed or outsourced to third parties, will be exacerbated."

When undergoing a change in the way a business operates, many managers conduct a thorough review of the procedures and agreements in place before commencing with the initiative.

For example, when outsourcing, managers tend to look for how it adds value to the business and the suitability of service level agreements. However, following this initial check, many fail to continue to monitor that this benefit is still being realised and if the SLAs are still appropriate as the business evolves.

Similarly when setting up operations over-seas, whether that be a wholly owned entity or a joint venture, the initial set up tends to be thorough. But, once in place and working well, managers tend not to review the basics on a regular basis.

Mr Froom said: "With geographically dispersed locations there is always a risk that local management will seek to deliver to budget in order to keep the level of group attention to a minimum. Meeting targets by manipulating earnings or other misreporting does take place.

"For example, we helped a UK company with concerns about its Belgian subsidiary. These centred on the increasing level of trade debtors reported to the UK. Our investigation identified significant differences between the local statutory accounts and the numbers reported to the UK.

"The local accounts showed losses while the group reporting showed profits in line with budget, achieved by overstating sales. The practice had gone on for several years undetected because the group's monthly review process focused on the profit and loss account and ignored the balance sheet - a costly error."

According to Simon Dwyer, director within KPMG's Forensic team in Birmingham, the risk of fraud also grows as economic growth slows and, if businesses are failing to check basic controls, then they could be leaving themselves open to significant losses.

He said: "It is vital that managers look at the fraud risk exposure of their business and regularly review it to ensure the appropriate fraud controls are in place. If a company is outsourcing a significant amount of its business or operates remotely, these checked must take place at least annually.

"It is important to know the individuals working for you, especially in remote locations. One of our UK clients had concerns about a central Asian expatriate manager and his local agent. We conducted an integrity due diligence investigation into the country manager and agent by retrieving and analysing public records and making discreet enquiries locally.

"Our findings highlighted that the agent still controlled a business he claimed to have sold as part of his contract with our client, and he and the local manager were planning a business venture with the expatriate manager.

"Managers need to ensure time is set aside to check that the fundamental aspects of the business are working correctly and efficiently. If a business can establish this approach as part of its culture then risks can be mitigated. A failure to do so could prove costly."