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Corporate Compliance Insights
Home GRC Vendor News

Senior Managers Failing to Set Right Tone on Business Ethics

by Corporate Compliance Insights
April 5, 2017
in GRC Vendor News
Senior Managers Failing to Set Right Tone on Business Ethics

  • 51 percent of all respondents still perceive that corrupt practices happen widely in business in their country
  • 77 percent of board members or senior managers say they could justify unethical behavior to help a business survive
  • Only 21 percent of respondents are aware their company has a whistleblowing hotline

London (April 5, 2017) – Despite sporadic progress in tackling bribery and corruption across Europe, the Middle East, India and Africa (EMEIA), 51 percent of respondents to the biennial EY EMEIA Fraud Survey still perceive the problem to be widespread in their country (Refer to table below for individual country breakdown – “Bribery/corrupt practices happen widely in business in this country”). Twenty-seven percent of all respondents state that it is common practice in their business sector to use bribery to win contracts, including 14 percent of respondents in Western Europe. The report, Human instinct or machine logic – which do you trust most in the fight against fraud and corruption?, surveyed 4,100 employees from large businesses in 41 countries.

Senior management are failing to foster a culture of ethical behavior finds the survey: 77 percent of board directors or senior managers say they would be willing to justify some form of unethical behavior to help a business survive, with one-in-three willing to offer cash payments to win or retain business. Nevertheless, 28 percent of respondents believe that regulation has had a positive impact on deterring unethical behavior, an increase of 4 percentage points from the 2015 survey, with 77 percent of respondents agreeing that the prosecution of individuals would help deter fraud, bribery and corruption by executives.

Read the full report here.

The Generation Y cohort (25 to 34 year-olds), who constitute 32 percent of respondents, demonstrate more relaxed attitudes toward unethical behavior the survey finds. Seventy-three percent state that such behavior is justified to help a business survive, compared with 49 percent of 45 to 54 year-olds (Generation X) surveyed who hold this view. Furthermore, 68 percent of Generation Y respondents believe their management would engage in unethical behavior to help a business survive, and 25 percent of this age group would offer cash payments to win or retain business. Generation Y also show a heightened distrust of their co-workers, with 49 percent believing that their colleagues would be prepared to act unethically to improve their own career progression, compared with 40 percent across all age groups.

Jim McCurry, EY EMEIA Fraud Investigation & Dispute Services Leader, says:

“Despite positive signs of improvement in some emerging economies, more than half (51 percent) of respondents across EMEIA still perceive bribery and corruption as a major challenge. Furthermore, there is worrying evidence of a lack of leadership from senior executives to tackle these issues, which may be negatively influencing the younger generation workforce.

“Companies need to take steps to create a culture in which it is in employees’ interests to do the right thing. Training and awareness programs can play a big role in helping individuals understand the consequences of fraud and corruption, and encourage them to come forward if they have concerns over unethical conduct.”

Failure to establish a culture of reporting unethical behavior

Despite the fact that whistleblowing hotlines are now considered an important part of a company’s compliance program, only 21 percent of respondents were aware of such a channel in their company, while 73 percent would consider providing information directly to a third party such as a law enforcement agency or regulator. Moreover, 52 percent of respondents had concerns about misconduct within their organization. Of those respondents, 48 percent felt pressure to withhold information, leading to 56 percent of this group choosing not to report.

Respondents in emerging markets such as India (27 percent) and Nigeria (24 percent) agree that they are now offered more protection to blow the whistle in comparison to three years ago. However, more limited improvement has been seen in developed markets such as Italy (11 percent) and France (4 percent).

McCurry says: “For many companies, limited progress appears to have been made in providing an effective mechanism for highlighting wrongdoing. Employees are either unaware of the correct channels, or more worryingly, feel pressured to withhold information, which shows a lack of leadership from senior management to tackle the issue. Companies need to invest in effective whistleblowing channels and communicate appropriate processes to help ensure employees who witness wrongdoing know where to go.”

Appropriate monitoring of employees’ data important in preventing insider threat

The survey reveals a tension between the use of technology and the monitoring of employees’ private data. Seventy-five percent of respondents say their companies should monitor sources such as emails, calls or messaging services. Despite this, 89 percent feel monitoring data, such as instant messenger accounts, would constitute an invasion of privacy. When asked if they support the routine collection and analysis of their data from email, telephone, security systems or the public record, respondents from Western (42 percent) and Eastern (49 percent) Europe were less supportive in comparison to India (87 percent) and Africa (80 percent).

McCurry says: “The threat posed by employees is very real but remains difficult to detect without gathering and analyzing data from a variety of sources. By focusing on behavioral patterns and the use of unauthorized external storage devices, companies can identify individuals who may pose a higher risk.”

Bribery/corrupt practices happen widely in business in this country
Rank 2017 Country % 2017 % 2015 L4L Rank* Rank 2015
1 Ukraine 88 80 1 7
2 Cyprus 82 N/A N/A N/A
3 Greece 81 69 2 12
4 Slovakia 81 78 3 8
5 Croatia 79 92 4 1
6 Kenya 79 90 5 2
7 South Africa 79 78 6 9
8 Hungary 78 73 7 10
9 India 78 80 8 6
10 Egypt 75 64 9 15
11 Slovenia 74 87 10 3
12 Nigeria 73 72 11 11
13 Italy 71 67 12 14
14 Bulgaria 68 N/A N/A N/A
15 Turkey 67 63 13 16
16 Russia 66 60 14 18
17 Spain 64 69 15 13
18 Czech Republic 63 61 16 17
19 Portugal 60 82 17 5
20 Serbia 57 84 18 4
21 Jordan 53 N/A N/A N/A
22 Latvia 51 55 19 19
23 Ireland 47 50 20 20
24 Lithuania 47 45 21 21
25 Germany 43 26 22 30
26 Saudi Arabia 43 44 23 22
27 Poland 38 43 24 23
28 Belgium 36 34 25 27
29 Austria 32 42 26 24
30 Estonia 32 21 27 33
31 Romania 31 39 28 25
32 France 28 29 29 28
33 UAE 27 24 30 31
34 UK 25 27 31 29
35 Netherlands 23 13 32 34
36 Oman 19 36 33 26
37 Sweden 18 10 34 37
38 Switzerland 18 12 35 35
39 Finland 16 11 36 36
40 Norway 10 21 37 32
41 Denmark 6 4 38 38
Source: EY EMEIA Fraud Survey 2017 Human instinct or machine logic – which do you trust most in the fight against fraud and corruption?

Table shows percentage of respondents answering yes.

*Average of all respondents: 2017 51 percent, 2017 L4L, 2015 51 percent (L4L = Like for Like – countries that were surveyed in both 2015 and 2017).

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.

About EY’s Fraud Investigation & Dispute Services (FIDS)

Dealing with complex issues of fraud, regulatory compliance and business disputes can detract from efforts to succeed. Better management of fraud risk and compliance exposure is a critical business priority — no matter the size or industry sector. With more than 4,500 fraud investigation and dispute professionals around the world, EY provides the analytical and technical skills needed to quickly and effectively conduct financial and other investigations and gather and analyze electronic evidence. Working closely with you and your legal advisors, we will assemble the right multidisciplinary and culturally aligned team, and bring an objective approach and fresh perspective to challenging situations, wherever you are in the world. And because we understand that you require a tailored service as much as consistent methodologies, we work to give you the benefit of our broad sector experience, our deep subject matter knowledge and the latest insights from our work worldwide.

About the Survey

Between November 2016 and January 2017, 4,100 interviews were conducted in 41 countries across EMEIA by Ipsos MORI on behalf of EY. The interviews consisted of both face-to-face and online interviews in local languages on an anonymous basis covering a mixture of company sizes, job roles and industry sectors.

For the purposes of this survey, emerging markets are defined as including: Bulgaria, Croatia, Cyprus, Czech Republic, Egypt, Estonia, Hungary, India, Jordan, Kenya, Latvia, Lithuania, Nigeria, Oman, Poland, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, South Africa, Turkey, UAE and Ukraine.

Developed markets are defined as: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the U.K.


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