12th Global Fraud Survey Growing Beyond: a place for integrity
Pressure on the board
Boards would benefit from a deeper understanding
Q: To what extent to do you agree or disagree that your board needs a more detailed understanding of the business if it is to be an effective safeguard against fraud, bribery and corrupt practices?
Base: All C-suite directors (736)
52% of c-suite interviewees think that the board needs a more detailed understanding of the business if it is to be an effective safeguard against fraud.
The board, and in particular the audit committee, has a key role in assisting the company to mitigate the risk of bribery and corruption.
Regulators have made it clear that a top-level commitment to an ABAC culture is required from the board. Key elements of an effective ABAC compliance program require significant board input and sponsorship.
The audit committee is, among other things, responsible for overseeing fraud, bribery and corruption risk assessments and the related controls and compliance programs.
Against these expectations, how are boards performing?
Insufficient knowledge of business operations
Our survey respondents suggest that not all boards are seen to be doing enough to properly understand the way their company is conducting business. Globally, 52% of c-suite interviewees think that the board needs a more detailed understanding of the business if it is to be an effective safeguard against fraud or corrupt practices.
This is a concern that was identified in our previous survey and an area where there does not appear to have been much progress.
In particular, respondents in rapid-growth markets see board understanding as being in need of development. This is a worrying development as many commentators argue that it is precisely these markets that pose the highest fraud, bribery and corruption risks.
A need for better, not more, information
From our leading practice interviews, we found many boards felt increasingly swamped by risk management and control information.
Combined with a growing sense of ABAC compliance fatigue, this contributes towards a 'tick the box' approach to managing risk. While it is inevitable that the board will have a less detailed understanding of the business than senior management, board members need to be deep enough into the detail of the operations to be able to focus on key areas of risk. In our experience, this can best be achieved by demanding more tailored and more focused reporting to the board.
New rewards for blowing the whistle
In 2010 the US adopted the Dodd-Frank Act which, among many other regulatory changes, created new financial incentives for whistleblowers. This marked a further evolution in the tools available to US regulators. The Act established a whistleblower bounty program for providing original information of misconduct leading to a successful enforcement action.
According to prosecutors, the Act has markedly increased both the quantity and quality of whistleblower claims.
While American companies, perhaps predictably, regard this development equivocally, respondents in rapid-growth markets express strong support for similar schemes. The regions most in favor of such a scheme include Africa, with 79% in favor, and Far East Asia, with 74% in favor.
The support among our respondents may reflect a high degree of skepticism about the ability of local regulators to effectively deal with persistently high levels of corruption. It also suggests a failure of some companies operating in these regions to implement effective policies to encourage and follow-up on whistleblowing within their organizations.