Ernst & Young European Fraud survey
Irish business amongst top in Europe at increasing corporate fraud detection mechanismsIncidence of corporate fraud in Ireland have reduced by half in the last 12 months as fraud detection processes are introduced by businesses attempting to reduce financial loss. The findings come from data contained in the latest Ernst & Young European Fraud survey released in Ireland today. Just 16% of Irish businesses confirm that they have experienced incidence of serious fraud in comparison to more that 30% surveyed in 2010.
Findings show that Irish businesses have been amongst the most proactive across Europe in terms of increasing fraud detection devices within their organisations over the last 12 months. 37% of Irish businesses have increased fraud detection in the last year, just marginally behind Turkey (42%) and Hungry (38%) but ahead of the European average (29%).
However, today’s findings also confirm several gaps exist which continue to limit the effectiveness of anti-corporate fraud policy in Ireland and particularly, day-to-day adherence and enforcement of policies across the Irish business community.
Despite the growth in corporate fraud strategy, a significant number of business professionals continue to believe that some degrees of unethical behavior is permissible, if engagement in such activity helps them achieve business growth.
Over a quarter of all senior managers and over a third of employees confirmed that activity including offering personal gifts, offering free entertainment and even offering cash payments was acceptable in order to win or retain new business. This is consistent with the findings across Europe where more than a third of employees polled at large companies across Europe are prepared to offer cash, gifts or entertainment to win business and nearly half are not aware of an anti-bribery policy at their company. Employees in Greece (44%) and Russia (39%), for example, are most likely to pay cash bribes while those in Norway (6%) are among the least likely. Overall, two-thirds acknowledge bribery and corruption are widespread in their country and 40% say the problem has worsened over the last two years of economic downturn.
Commenting on the results, Julie Fenton Fraud Investigation and Disputes Partner with Ernst & Young says “What’s clear is that despite more widespread introduction of corporate fraud policy, there remains much work to be done by business leaders to clearly articulate how such anti-fraud policies translate into acceptable day-to-day business behaviour. This includes clearly communicating what is acceptable and what is not, the consequences for employees who do not adhere to these rules and regulations and following through on disciplinary procedures when breeches occur”.
Failure of compliance leadership from management
It is clear that employees across Ireland hold boards and senior management accountable for establishing and enforcing appropriate corporate behaviour. Over 80% of those surveyed think that senior management should face criminal charges for failing to take effective measures to prevent fraud, bribery or corruption somewhere in their organisation
Irish businesses received the most communication across Europe regarding anti-corporate fraud policy over the last year. 60% of those surveyed confirm that they have received anti-bribery and anti-corruption policy training (European average 49%).
However, employees in Ireland are also less than convinced by management’s commitment to enforcing such policies or the consequences for breaking these rules. A quarter of respondents do not trust in management to behave with integrity themselves in terms of adhering to corporate fraud polices. A third confirmed that no one in their organisation has been penalized for breaching anti-corporate fraud policies; in fact, a third also claim to have seen co-workers who have engaged in fraudulent activity promoted.
Fenton comments: “A declining focus on enforcement of anti-fraud measures and a continued tolerance of unethical behaviour inevitably increases the risk of fraud, bribery and corruption. Reinvigorating the commitment by management and their Boards to ethical growth should be an urgent priority, and will be appreciated by employees and stakeholders alike.”
Greater regulation
Demand is growing in Ireland for greater regulation to reduce the risk of corporate fraud, bribery and corruption with 87% of businesses confirming that they agree with the need for more supervision by regulators and government in the future, to reduce the risk of fraud, bribery and corruption.
However, 51% of business leaders surveyed are sceptical of the willingness to tackle bribery and corruption cases in Ireland – the greatest level of scepticism amongst any other European country surveyed.
30% believe regulators are less willing to act as they do not wish to add to business pressures during the downturn. At the same time, respondents recognize the challenges facing regulators, with 37% believing further legal powers are needed for regulators to be effective and 32% saying regulators have insufficient resources.
Fenton comments: “Effective enforcement of regulation is essential. This requires time and effort on behalf of the various regulatory bodies to make sure appropriate actions are taken and that the actions that are taken succeed.”
Impact of ethical conduct on company performance
The survey results show that employees across businesses in Ireland perceive that additional benefits can be achieved by companies acting with integrity. 65% say that there is a commercial advantage to ethical behaviour. Employees certainly prefer to work for companies with strong reputations for ethical conduct, with 40% of Irish respondents unwilling to work for a company involved in a major bribery or corruption case.
Global results
Fenton comments: “Our survey findings should cause concern among directors across Europe. Complacency about fraud, bribery and corruption, combined with cost cutting initiatives at many companies, creates additional exposure. With new legislation like the UK Bribery Act giving regulators tougher enforcement powers, management in particular should demonstrate greater commitment to ethical conduct through their actions, including making tough choices regarding departmental budgets and disciplinary measures.”
