Only 52% of Canadian companies protect themselves against corruption risks when buying into business globally: Ernst & Young
(Toronto,14 June 2012) While 82% of Canadian executives feel investments into new global markets pose risks for their companies, only 52% say their company always conducts due diligence into fraud-related risks before acquiring a new business, Ernst & Young finds in a new survey. What’s more, the 12th Global Fraud Survey – Growing Beyond: a place for integrity shows a mere 29% of Canadian respondents say their organizations perform post-acquisition due diligence into corruption-related risks.
“Canadian companies seem to be very aware of the risks posed by fraud, bribery and corruption — but they expose themselves by not taking some critical steps,” says Mike Savage, Partner in Ernst & Young’s Fraud Investigation & Dispute Services practice. “Moving into new markets can reap significant rewards, but only if done right. That means understanding the local commercial practices and those of the target before you move ahead.”
Savage says while the results aren’t necessarily surprising, they are troubling. “Some 42% of Canadian respondents say company management might be likely to cut corners to meet targets when economic times are tough. That’s lower than the global response, but still worrisome.”
Interestingly, while 95% of Canadian respondents state that their company has anti-bribery/anti-corruption policies, only 43% of respondents note that people have been penalized for breaching these policies. Without consistently applied internal discipline, employees may believe breaches of those policies are tolerated.
“In volatile economic environments, growth and responsible business conduct can sometimes appear to be competing priorities,” states Savage. “But generally the opportunities can be pursued by using internal controls to mitigate the risks. Organizations have been more successful in growing internationally where they make concerted, risk-focused efforts that target areas of potential exposure, and management leads by example. Successful companies are those able to balance the priorities of growth and ethical business conduct.”
He further notes that getting things right is not just about the documented details — it’s also important to understand the broader operating environment a business will be working in. For example, only 28% of Canadian respondents believe they have joint liability for the actions of the third party, compared to 39% of global respondents. International regulatory settlements show that third-party due diligence and monitoring are important compliance requirements. Examples of third parties include distributors, agents and business consultants.
For effective fraud prevention, Canadian respondents put the most confidence in regular internal audits (90%) followed by audits by an external auditor (82%) and whistle blowing hotlines (81% compared to 53% globally).
About the Global Fraud Survey
The 12th Global Fraud Survey was conducted between November 2011 and February 2012. Researchers conducted a total of 1,758 phone interviews with employees in 43 countries covering North America, Latin America, Europe, Africa, Middle East, Far East and Oceania. Principle respondents were CFOs, heads of internal audit, heads of legal and chief compliance officers. Fifty interviews were conducted in Canada.
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