Management and boards are struggling to respond to long-standing corruption threats, let alone addressing emerging risks such as cybercrime

January 01, 1970 by Rebecca Gillingham

Cyber crimeEY recently published its 13th Global Fraud Survey which aims to measure how companies are tackling fraud, bribery, corruption and other financial crime risks.  The survey of more than 2,700 C-level executives in 59 different countries highlighted that almost 40% believed bribery and corruption to be widespread in their countries and nearly half of the respondents considered cybercrime to be low risk.  These results suggest that the executives participating might not have an appreciation of the risks associated with cybercrime threats (see our earlier post on how the bitcoin could be used for money laundering).  The biggest concern for participants was hackers, but the majority underestimated the risks posed by organised crime syndicates, as well as foreign states.

Executive apathy

The difficulties faced by top level executives in the effective governance of large, international businesses can only be augmented by insufficient awareness of the risks they are facing. The survey found that as many as 38% of the respondents do not attend anti-bribery/anti-corruption (ABAC) training, nor do they participate in an ABAC risk assessment.  These statistics are disturbing when compared with the 21% of CEOs that said they had been asked to pay bribes in the past.

David Remnitz, EY’s Global FIDS Forensic Technology Leader, explained that “Regulators are investing heavily to bolster their ability to mine big data from corporations for potential irregularities. The latest data visualisation tools can help to identify revenue recognition or procurement-related red flags earlier and more efficiently. Boards should be asking how management is leveraging forensic data analytics to get the most from their big data in order to improve compliance and investigative outcomes.”

The need to reinvigorate compliance

The survey also found that 20% of companies still do not have a comprehensive ABAC policy. In a highly regulated business landscape where international co-operation is commonplace, the lack of significant processes in place to mitigate the risks is leaving many organisations open to liability.

Despite the high levels of expertise some organisations employ to combat the risks of fraud, bribery and corruption, risk will remain constant. The EY survey has collated more than a decade of information from both sides of the problem and the results indicate a structural level of unethical and illegal conduct. Being able to detect this conduct and act on it can mean the difference between the success and failure of a business, as well as the liberty of those in control.

While the business needs to own the risk, internal audit and compliance play essential roles in both improving standards of business conduct and in keeping the company out of trouble. Having a strong internal compliance function is a solid foundation for successfully transposing the standards to external policies.

Companies, their boards and other stakeholders would be well served to deliver on these important priorities. With more focus on driving revenues from less mature markets, the challenges for companies are getting more complex.  At the same time, regulators are working together across borders like never before to hold companies and their executives to account.

End notes

Better understand your customers, employees and vendors to reduce risk, raise productivity, increase profitability and improve decision-making with Lexis Diligence. Lexis Diligence brings together all the intelligence you need in one place to conduct consistent due diligence and comply with anti-money laundering and anti-bribery regulatory requirements. It's fast, intuitive and doesn't require any additional IT investment or training.