April 29, 2016 Tackling corruption
In our last article, your ethics, your brand, we examined the way in which business and brand reputation are now increasingly intertwined with ethics, with doing the right thing, acting in the right way in order to benefit the wider stakeholder constituency. Since that article was written, EY’s 2016 Global Fraud Survey entitled Corporate Misconduct – Individual Consequences has been released.
The survey, now in its 14th year, collates responses from senior executives in 62 countries across the globe. Not only does it review attitudes and trends, it also seeks to help organisations to take action in order to reduce levels of corruption within organisations.
One of the statistics highlighted in this year’s report is the fact that 42% of respondents felt able to justify unethical behaviour in order to meet financial targets. In addition, one in ten respondents globally admitted they would make a cash payment to win or retain business in an economic downturn. This, despite the fact that regulators are increasingly holding individuals accountable for their actions.
So what can organisations do to minimise risk? As the report says, being aware of risk factors is not enough; companies need to take action, to adapt and strengthen their existing controls. Actions suggested in the report include adequately resourcing compliance and investigation functions, undertaking regular fraud risk assessments, and providing comprehensive training to employees.
The report also recommends establishing clear whistleblowing channels although it does acknowledge that these may not be as effective as they could be; with loyalty to the company and to colleagues preventing people from reporting concerns. As a foil to this the report comments that data is becoming an increasingly important monitoring tool.
Another area of concern is the relationship which organisations have with third parties. The globalisation of business has resulted in increasing interconnectedness; in particular with organisations devolving key functions to other businesses or collaborating with other organisations on a single project.
Despite this, almost 20% of respondents commented that these third parties were neither identified nor included in their anticorruption due diligence programmes. This is perhaps one area where the growing international pressure to reveal beneficial ownership of organisations may help to mitigate fraud and corruption risk and the report did highlight a high level of support for this measure. In fact, 91% of survey respondents agreed that it was important to identify the beneficial owners of businesses with which they had a relationship.
Corrupt and unethical practices are not simply a problem for individuals or organisations; they also affect shareholders, employees, consumers and the wider society. Awareness, training and robust risk management processes can help organisations to not only tackle corruption but to prevent it occurring in the first instance.