Fraud is the greatest risk for ME companies, survey finds
Regulators around the world have been imposing more than $11 billion of financial penalties globally since 2012.
Businesses across the Middle East have identified fraud and corruption as the greatest risk to their operations, followed by cyberattacks, a new survey has found.
The 15th EY Global Fraud Survey showed that 42 per cent of executives surveyed in the Middle East believe that corrupt practices still occur widely in business. This is despite the fact that regulators and law enforcement agencies around the world have been imposing more than $11 billion of financial penalties globally since 2012.
"The findings show that there is often a lag between the introduction of stronger anti-corruption laws and a change in behavior. While new laws and regulations have been introduced and enforcement intensified, non-compliant behavior still remains, though the Middle East is certainly tackling the issue," said Charles de Chermont, EY MENA Fraud Investigation & Dispute Services Leader.
While 97 per cent of respondents agreed that it is important to demonstrate that their organisation operates with integrity, 39 per cent still think that offering cash payments can be justified if they help a business survive an economic downturn.
"Businesses remain vulnerable to significant financial and reputational harm. Management teams must identify and address the root causes of such conduct in their organization. Compliance programs need to keep pace with the impact of rapid technological advancements and the increasingly complex risk environment on business operations," de Chermont advised.
The report also found that individuals shirk responsibility; when asked who is held accountable for ensuring employee integrity, 50 per cent of respondents believe that integrity is the primary responsibility of either management or the board, and only 14 per cent feel that individuals should take primary responsibility for their organisation behaving with integrity.
"Organisations need to make it clear that acting with integrity is everyone's responsibility," de Chermont stressed. "The pressing challenge for management and the board, therefore, is to build a robust culture of integrity and compliance in which employees do the right thing because it's the right thing to do, and not just because a company code of conduct says they should. The encouraging news is that with today's advances in forensic data analytics, companies can use technology to detect fraud as they seek to improve compliance."