Large organisations have been found to be misrepresenting their financial performance and engaging in bribery as a means to meet growth and profit expectations
Ernst and Young’s twelfth annual Global Fraud Survey has revealed that one in five of almost 3,500 staff in 36 nations confirmed manipulation in their firms. Unethical conduct including fraud, bribery and corruption are becoming more prevalent as large firms struggle to meet projections.
Despite the results illustrating that countries such as the UK and India are strengthening their enforcement regimes, the level of fraud worldwide still remains high. On a global basis, 39 percent of respondents reported bribery or corrupt practices occurred frequently in their countries. Despite introduction the Bribery Act in the UK to dissuade employees from entering into bad gift deals as a way to secure financial transactions, 37 percent of UK survey respondents believed that bribery and corruption were common in business.
This speaks volumes of the 75 percent of respondents who agreed that managers were under increased pressure to deliver good financial performance over the next 12 months.
The alarming statistics highlight the fact that many firms are not familiar with anti-bribery and anti-corruption policies. Nearly half of sales staff across the board do not consider existing policies relevant to their role. Acknowledging ABAC regulation could significantly reduce these fraudulent practices, but currently, without adequately trained employees, the ability of companies to identify issues or act on allegations remains difficult.
Respondents said that work pressure linked to performance is leading to more cuts in remuneration in developing markets than in developed ones. At least 43 percent of Indian respondents said that this was the case in their country, where the government is currently working on its ABAC legislations. 33 percent of Indian respondents felt that offering cash payments to win or retain business can be justified, a reflection of the country’s cultural practices. “India has robust policies but the issue is compliance,” said Arpinder Singh, India leader of Ernst & Young’s fraud investigation and dispute services practice. “In the current challenging market condition, the incentives for unethical conduct can be strong when personal remuneration is at stake and pressure to deliver growth is being felt directly.”
“In this environment, some inevitably succumb to unethical behaviour,” said David Stulb, global leader of Ernst & Young’s fraud investigation and dispute services practice. “Shareholders expect management to take responsibility for protecting the business by implementing anti-bribery and anti-fraud programmes at all levels of their organisation. Boards must challenge management to ensure they are focused on high risk areas.”
The role of the CFO has been brought into question by the audit and consultancy firm.
Regulators and other external stakeholders rely on the CFO as a key interface with the business, meaning that they have a resounding responsibility placed on them to override the any corrupt actions. Worryingly, 15 percent of CFOs surveyed would be willing to make cash payments to win or retain business and 4 percent view misstating a company’s financial performance as justifiable to help a business survive. Less than half of these had attended ABAC training themselves. If businesses are to become more honest, the CFO needs to lead by example.