How to navigate integrity challenges in Southeast Asia

Persistent concern over third-party risks

Third-party risks remain a significant challenge in Southeast Asia: 84% of integrity incidents in the region over the last two years involve third-party relationships. Alarmingly, 20% of respondents would overlook unethical behavior by third parties if requested by their managers, directors or investors, and 21% would do so if it positively impacts their career progression or financial compensation. This data point remains consistent with the prior survey results in 2022, signaling that companies need to strengthen governance frameworks for third-party relationships. 

In Southeast Asia, organizations have incurred multimillion-dollar fines in the recent past for fraud and corruption violations that involved their third parties acting for them and on their behalf, among other offences. Therefore, implementing robust due diligence processes is crucial so that external partners adhere to the same ethical standards as internal employees.

ESG: external pressures still dominate

Environmental, social and governance (ESG) considerations continue to gain momentum, but businesses in Southeast Asia are largely driven by regulatory requirements rather than internal reform. Almost 64% of respondents indicate that their ESG-related policies are compliance-driven, similar to the findings from 2022. 

To help realize long-term sustainability, organizations must go beyond compliance and embed ESG values into their core business strategies, linking initiatives to profitability, risk management and stakeholder trust. Integrating ESG initiatives into everyday decision-making processes is crucial, as is aligning employees at all levels with the organization’s sustainability goals.

Key recommendations

To strengthen their integrity frameworks and mitigate ethical risks, organizations in Southeast Asia should focus on the following areas.

1. Leadership accountability

Close the “say-do” gap by ensuring that senior leaders act as a role model for ethical behavior, hold themselves accountable for any lapses and invest in programs that foster a strong culture of integrity across the organization.

2. Third-party governance

Strengthen oversight of third-party relationships by conducting thorough due diligence to ensure external partners uphold the same ethical standards as internal employees.

3. Whistleblower and accused protections

Implement trusted and transparent whistleblower systems that enable employees to report misconduct confidentially and without fear of retaliation. At the same time, establish independent and robust investigation protocols to ensure that individuals alleged of misconduct are treated fairly and protected from false or malicious allegations. Therefore, a disciplinary policy that is clearly communicated and enforced by the leadership will help uphold fairness for all parties. Strong confidentiality safeguards and clear reporting channels will foster a culture of integrity, trust and accountability.

4. AI governance

Develop robust governance frameworks to manage the ethical risks associated with AI, including data privacy and algorithmic bias. Establishing clear guidelines will help businesses navigate AI responsibly.

5. ESG integration

Move beyond regulation-driven ESG initiatives and incorporate sustainability and governance values into the organization’s core operations. Embedding ESG principles into decision-making processes will drive long-term growth and competitiveness.

Strong governance and ethical behavior not only protect organizations from legal and reputational risks but also foster sustainable growth in an increasingly competitive environment. By addressing the critical areas above, Southeast Asian organizations can strengthen their integrity frameworks, reduce corruption risks and position themselves as ethical torchbearers in the marketplace.

This article was coauthored with Philipp Kloeber, Director, Forensic & Integrity Services, Ernst & Young Advisory Pte. Ltd. It was first published in the Chartered Accountants Lab of the Institute of Singapore Chartered Accountants on 1 April 2025.

Summary

The EY Global Integrity Report 2024 reveals that while Southeast Asia has made improvements in compliance, significant ethical risks persist. To enhance integrity frameworks and mitigate ethical risks, organizations must prioritize leadership accountability, strengthen third-party oversight, improve whistleblower systems, develop robust AI governance frameworks and integrate ESG values into core operations for sustainable growth.