Senior managers failing to set right tone on business ethics, finds EY Fraud Survey

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  • 51% of all respondents still perceive that corrupt practices happen widely in business in their country. The number was higher in Africa at 77%.
  • In Kenya, 79% of the respondents perceive corrupt practices to be prevalent in businesses in their country.
  • 76% of respondents from Kenya believe that prosecuting individuals would help deter fraud, bribery and corruption by executives.

Kenya, 5 APRIL 2017. Despite sporadic progress in tackling bribery and corruption across Europe, the Middle East, India and Africa (EMEIA), 51% of respondents to the biennial EY EMEIA Fraud Survey still perceive the problem to be widespread in their country.1 Twenty-seven percent of all respondents state that it is common practice in their business sector to use bribery to win contracts, including 14% of respondents in Western Europe. The report, Human instinct or machine logic – which do you trust most in the fight against fraud and corruption?, surveyed 4,100 employees from large businesses in 41 countries.

Of the respondents sampled for the study in Kenya, 79% say bribery and corrupt practices are widespread in their business sector. However 76% - slightly lower than the continent’s 80% - say prosecuting individuals would help deter fraud, bribery and corruption by executives.

In terms of market rankings on whether regulatory activity has had a positive impact on companies, Kenya came in third on the list of top 20 markets, with 68% of the respondents saying regulatory activity has had a positive impact. Kenya followed Nigeria, which received an 82% positive response and Jordan, which came in second with 75%.

Senior management are failing to foster a culture of ethical behaviour
The survey has found that 77% of overall board directors or senior managers, sampled in the survey, say they would be willing to justify some form of unethical behaviour to help a business survive, with one in three willing to offer cash payments to win or retain business.

“The results of our survey indicate that unethical behaviour and high levels of mistrust among colleagues are key characteristics of today’s workforce, particularly among younger generations,” Muchiri says.

The Generation Y cohort (25 to 34 year olds), who constitute 32% of overall respondents, demonstrate more relaxed attitudes toward unethical behaviour the survey finds. Seventy-three percent state that such behaviour is justified to help a business survive, compared with 49% of 45 to 54 year olds (Generation X) surveyed who hold this view.

Furthermore, 68% of Generation Y respondents believe their management would engage in unethical behaviour to help a business survive, and 25% of this age group would offer cash payments to win or retain business. Generation Y also show a heightened distrust of their co-workers, with 49% believing that their colleagues would be prepared to act unethically to improve their own career progression, compared with 40% across all age groups.

“With 73% of respondents from Generation Y holding the view that unethical action can be justified to help a business survive, it is imperative to pay attention to this younger generation, since they are the future of businesses,” says Muchiri.

Failure to establish a culture of reporting unethical behaviour
“There are rising levels of concern about unethical behaviour among employees and substantial pressure on employees not to report concerns, but awareness of whistleblowing hotlines could be higher,” says Muchiri.

Respondents in emerging markets such as India (27%) and Nigeria (24%) agree that they are now offered more protection to blow the whistle in comparison to three years ago. However, more limited improvement has been seen in developed markets such as Italy (11%) and France (4%).

Whistleblowing hotlines are now considered an important part of a company’s compliance program and in Kenya, 43% of the respondents are aware of such a channel in their company. Of the total sample, 60% say they would consider providing information on fraud and corruption to a regulator and 57% would likely approach a law enforcement agency.

“In Kenya, fear for personal safety and concerns about future career progression within a company were reported as the leading hindrances to reporting an incident of fraud, bribery and corruption. This was the same observation across Africa,” says Muchiri

Forty-one percent of the respondents in Kenya say they have never had any information or concerns about misconduct. Only 12% say they have had information or concerns, which they have withheld due to internal pressure.

Sixty-two percent of respondents from Kenya say that fear for personal safety would prevent them from reporting an incident of fraud, bribery and corruption. Fifty-one percent of the respondents from Kenya say concern about their future progression in a company would prevent them to do so.

Although there is still work to be done by senior management of companies in Kenya, in terms of high ethical standards, 69% of respondents said that in the last two years, they had heard senior management communicate frequently regarding the importance of maintaining high ethical standards. This percentage was higher than the average of all survey respondents, at 32%.

Appropriate monitoring of employees’ data important in preventing insider threat
Threats posed by insiders are difficult to detect without collecting and analysing data from a variety of sources. However, the survey reveals a tension between the use of technology and the monitoring of employees’ private data. Violations of privacy are one of the top issues the survey found Kenya’s respondents to have, as companies monitor their data sources as part of their strategy against fraud and corruption. Sixty-six percent of respondents in Kenya stated that having their companies monitor their emails is a violation of privacy, with 71% saying they find having their instant messenger monitored to be the problem. But respondents in Kenya were more sensitive to monitoring of telephone calls, and social media profiles, polling at 75% and 74%, respectively.

Muchiri says: “Companies need to leverage new technologies to identify and mitigate internal and external threats to the business. By focusing on behavioural patterns such as anomalies in employee work hours, attempts to access restricted work areas and the use of unauthorised external storage devices, companies can identify individuals who may pose a higher risk to the business. Organisations should bridge the gap between the need to monitor employee behaviour and concerns for privacy by raising awareness of the importance of collecting and monitoring such data. Companies should make employees aware of the financial, reputational and regulatory consequences, which can arise if company data is leaked or compromised.”

While 76% of respondents from Kenya indicated that companies should have a robust cyber breach response plan, only 51% believed that their companies had a robust cyber breach response plan.

“To build an effectiveness cyber breach response programmes, companies should among other things ensure proper awareness of such programmes and involvement of the cross-functional stakeholders. This would ensure timely escalation, assessment and investigation of cyber incidences,” Muchiri concludes.


Bribery/corrupt practices happen widely in business in this country
Rank 2017 Country % 2017 % 2015 L4L Rank* Rank 2015
1 Ukraine 88 80 1 7
2 Cyprus 82 N/A N/A N/A
3 Greece 81 69 2 12
4 Slovakia 81 78 3 8
5 Croatia 79 92 4 1
6 Kenya 79 90 5 2
7 South Africa 79 78 6 9
8 Hungary 78 73 7 10
9 India 78 80 8 6
10 Egypt 75 64 9 15
11 Slovenia 74 87 10 3
12 Nigeria 73 72 11 11
13 Italy 71 67 12 14
14 Bulgaria 68 N/A N/A N/A
15 Turkey 67 63 13 16
16 Russia 66 60 14 18
17 Spain 64 69 15 13
18 Czech Republic 63 61 16 17
19 Portugal 60 82 17 5
20 Serbia 57 84 18 4
21 Jordan 53 N/A N/A N/A
22 Latvia 51 55 19 19
23 Ireland 47 50 20 20
24 Lithuania 47 45 21 21
25 Germany 43 26 22 30
26 Saudi Arabia 43 44 23 22
27 Poland 38 43 24 23
28 Belgium 36 34 25 27
29 Austria 32 42 26 24
30 Estonia 32 21 27 33
31 Romania 31 39 28 25
32 France 28 29 29 28
33 UAE 27 24 30 31
34 UK 25 27 31 29
35 Netherlands 23 13 32 34
36 Oman 19 36 33 26
37 Sweden 18 10 34 37
38 Switzerland 18 12 35 35
39 Finland 16 11 36 36
40 Norway 10 21 37 32
41 Denmark 6 4 38 38

Source: EY EMEIA Fraud Survey 2017 Human instinct or machine logic – which do you trust most in the fight against fraud and corruption?
Table shows percentage of respondents answering yes.
*Average of all respondents: 2017 51%, 2017 L4L, 2015 51% (L4L = Like for Like – countries that were surveyed in both 2015 and 2017).

View the survey online at ey.com/fraudsurveys

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Notes to Editors

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About EY’s Fraud Investigation & Dispute Services (FIDS)

Dealing with complex issues of fraud, regulatory compliance and business disputes can detract from efforts to succeed. Better management of fraud risk and compliance exposure is a critical business priority — no matter the size or industry sector. With more than 4,500 fraud investigation and dispute professionals around the world, EY provides the analytical and technical skills needed to quickly and effectively conduct financial and other investigations, and gather and analyze electronic evidence. Working closely with you and your legal advisors, we will assemble the right multidisciplinary and culturally aligned team, and bring an objective approach and fresh perspective to challenging situations, wherever you are in the world. And because we understand that you require a tailored service as much as consistent methodologies, we work to give you the benefit of our broad sector experience, our deep subject matter knowledge and the latest insights from our work worldwide.

About the survey

Between November 2016 and January 2017, 4,100 interviews were conducted in 41 countries across EMEIA by Ipsos MORI on behalf of EY. The interviews consisted of both face-to-face and online interviews in local languages on an anonymous basis covering a mixture of company sizes, job roles and industry sectors.

For the purposes of this survey, emerging markets are defined as including: Bulgaria, Croatia, Cyprus, Czech Republic, Egypt, Estonia, Hungary, India, Jordan, Kenya, Latvia, Lithuania, Nigeria, Oman, Poland, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, South Africa, Turkey, UAE and Ukraine.

Developed markets are defined as: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK.

 


1 Refer to table below for individual country breakdown – “Bribery/corrupt practices happen widely in business in this country”