Economic uncertainty/unethical conduct

How should over-burdened compliance functions respond?

"In a year characterized by geopolitical risk, economic uncertainty and increased regulatory intensity, the findings of our 2017 Asia- Pacific Fraud Survey are cause for concern. Our survey highlights multiple ‘red flags’ indicating that organizations are in danger of letting fraud risk spiral out of control.

The findings reveal that current compliance programs in the region are not yet resulting in ethical employee behavior. Despite increased organizational efforts to combat fraud, bribery and corruption, signi cant numbers of the almost 1,700 employees surveyed believe a wide range of unethical behaviors are justified to help a business survive. At issue is a perceived lack of ethical leadership. Compliance policies may be in place but, under pressure to deliver growth, some senior managers are ignoring unethical actions to achieve corporate targets.

As a result, the more than 90% of employees who said they want to work for a company with a strong compliance culture are in a difficult situation. The vast majority said they want to do the right thing, but compliance policies are neither clear nor consistently applied. Our 2017 survey finds that a significant minority of employees are aware of, but have not reported, fraudulent activities.

Part of the issue is that a worrying number of employees don’t trust their organizations. Substantially more employees would rather report wrongdoing through an external channel, such as the police or a government authority, than use an internal whistleblowing hotline.

Over the last few years, many companies have failed to ll all the roles required to operate a robust compliance framework. With anti-bribery and anti-corruption (ABAC) policies failing to improve ethical conduct and regulatory enforcement in the Asia- Pacific (APAC) region at an all-time high, the reduced budget, and the slowing recruitment that economic uncertainty may cause, could create a dilemma for compliance teams.

Our survey suggests that organizations in APAC need to rethink their approach to compliance. Employees need absolute clarity around what policies mean and what compliant behavior looks like.

Leadership must:

• Incentivize ethical conduct

• Encourage,protect and reward whistleblowers

• Take transparent and consistent action against misconduct

To detect unethical behavior with fewer resources, companies need to harness technology including, forensic data analytics.

We hope the following results and analysis give executives and boards a valuable new perspective on the ethical leadership needed to manage fraud, bribery and corruption risks effectively and efficiently in the uncertain times ahead.

We also acknowledge and thank all of the respondents for their contributions."

Chris Fordham

EY Asia-Pacific Leader Fraud Investigation & Dispute Services

APAC Fraud Survey 2017 How should over-burdened compliance functions respond? | 2

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