♦ Employee concerns about fraud increasing
♦ Only half of respondents believe that their organization is fully prepared to protect against cyber threats
NEW YORK, JUNE 18, 2015. Ethical business practices are directly related to attracting and retaining talent in Asia-Pacific (APAC) with almost 80 percent of the respondents polled in EY’s APAC Fraud Survey 2015 titled “Fraud and Corruption – driving away talent?” claiming they would be unwilling to work for companies involved in bribery and corruption.
The survey, which is based on 1,508 interviews with employees of large companies[1] in 14 APAC territories, shows that fraud prevention is no longer just a legal and compliance issue, but impacts recruitment, talent retention and business continuity.
Chris Fordham, APAC Managing Partner of EY Fraud Investigation & Dispute Services, says:
“In APAC, where the labor market is highly competitive and it is already difficult to recruit and retain staff, the findings should be a wake-up call to businesses. Only 5 percent of respondents said it would make no difference to their willingness to work for an employer if it was found to have been involved in bribery and corruption.
It is essential that companies comprehensively address this via strong ethical leadership and a cohesive fraud prevention framework, with up-to-date and well-enforced internal controls, policies and procedures.”
“Building a strong anti-corruption reputation has never been more important, and more complex, for international companies operating in the region,” explains Brian Loughman, EY Americas Leader of FIDS. “U.S. companies must not only comply with the Foreign Corrupt Practices Act, but local legislation as well. With 86 percent of respondents under 25 saying they wouldn’t work for an unethical company, it’s vital for all businesses to have effective anti-bribery/anti-corruption (ABAC) compliance procedures in order to ensure their reputations are strong enough to attract emerging talent.”
Policies fail to improve behavior
When it comes to internal policies and procedures, the findings revealed that that since the survey was last conducted in 2013, more organizations have established codes of conduct (23 percent more), training (20 percent more), anti-bribery/anti-corruption (ABAC) policies (16 percent more) and whistleblowing hotlines (2 percent more). While these policies are a step in the right direction, they are not as effective as they should be.
In particular, slightly more than half of the respondents (52 percent) believe ABAC policies are irrelevant and ineffective, with 40 percent of companies not providing ABAC policy training and 41 percent of respondents believing a code of conduct has little impact on how people actually behave. More than a quarter of respondents (27 percent) said their colleagues are aware of but do not report fraudulent activities in their place of employment.
Additionally, whistleblowing hotlines are either missing or underused. More than half of companies (55 percent) have whistleblowing hotlines in place, but the amount of respondents prepared to use them has dropped by nearly a third since the 2013 survey (from 81 percent to 53 percent).
“The drop in whistleblower hotline usage appears to be due to respondents being increasingly concerned about insufficient legal protection and/or the lack of confidentiality for whistleblowers leading to a risk of retaliation,” says Fordham.
“It is clear that ABAC policies, codes of conduct and whistleblowing hotlines are not enough. Companies need to demonstrate and communicate about ethical behavior if they want to affect true change.”
Companies not perceived to be ready for cyber attacks
When it comes to cyber attacks, nearly half (47 percent) of respondents said they are worried their organization will be at an increasing risk of cyber attacks over the next few years, while only slightly more than half (56 percent) of the respondents believe that their organization is fully prepared to protect itself against these threats.
Fordham says, “It’s close to impossible to prevent all cyber breaches; however, this doesn’t detract from the potentially catastrophic consequences of a cyber attack. Companies must implement a cyber breach response program that includes the entire ecosystem of the business, so that if they experience an attack they can quickly respond and recover.”
Confidence in third-party risk mitigation misplaced
Slightly more than half (56 percent) of the respondents think third parties (joint venture partners, distributors, agents and vendors) are a risk to their business in relation to ABAC compliance. But 72 percent of respondents are confident that their organization is effectively managing the fraud, bribery and corruption risks associated with these third parties.
“This confidence is misplaced given the legal and reputational exposure it creates, as evidenced by the continuing focus by regulators on third parties and the role they often play in bribery and corruption scandals,” says Fordham. “Companies entering into a business relationship with a third party are advised to conduct as much due diligence as [with] an acquisition and should also extend their ethical framework to monitoring third-party behavior.
“There is a sea change in the perception of how fraud and corruption is affecting businesses. Until now, incentives for getting compliance right have centered largely on minimizing financial loss and reducing reputational damage. The impact of fraud on an organization is much broader than ever before – failure to address the employee angle could greatly impact productivity and growth strategies and ultimately companies could lose their top talent.”
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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 the survey
Between February 5 and 23, 2015, our researchers – the global market research agency Ipsos – conducted 1,508 interviews with employees of large companies in 14 APAC territories. Interviews were conducted online or face-to-face in English or local languages. Online panels were used in Australia, Mainland China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand and Vietnam. Interviews were conducted face-to-face in Sri Lanka. Interviews lasted approximately 15 minutes on average.
A hard quota applied to respondents working in government and the public sector at 20 percent in each territory except China and Vietnam.
About EY’s Fraud Investigation & Dispute Services practice
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 industry sector. With our more than 3,400 fraud investigation and dispute professionals around the world, we assemble the right multidisciplinary and culturally aligned team to work with you and your legal advisors. And 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.
