Reading this front page article in the Philippine’s leading business newspaper is a reality check that we are still a far way to go before we have a corrupt free business environment. Its interesting to note a majority admit corruption is part of the cost of doing business. Over a third did not give importance to attending the required training or establishing whistleblowing hotlines even when anti-corruption policies and penalties are in place. Even more interesting is that fact majority have not given priority to participating in risk assessments or discussing with the internal auditor bribery and corruption issues. If this is how it looks from the private sector, you can just imagine how the public sector looks like. And while corruption exists in any country, the respondents think it is more common in the Philippines than compared to the rest of Far East Asia.
From BusinessWorld Philippines
June 11, 2014
ANTI-CORRUPTION efforts have to be ramped up in Philippine companies, professional services firm SGV & Co. yesterday said, with a global survey showing that Filipino executives believe the problem to be widespread and many even willing to bend the rules.
Over half, or 54%, of the 50 Filipino executives polled in Ernst & Young’s 13th Global Fraud Survey said corruption happens widely in business, similar to the average for emerging markets but worse than the 32% for Far East Asia.
An even larger 58% of the respondents — described as working at the country’s largest firms — “think certain unethical behavior can be justified to help a business survive an economic downturn,” SGV said in a statement. One in five, in particular, are amenable to misstating financial results.
While some nine in 10 said their firms already had anti-corruption policies (90%) and penalties (86%) in place, over a third had not attended the requisite training nor established whistleblowing hotlines.
More than half said they had not participated in risk assessments (52%) and interviews with an internal auditor (60%) to address bribery and corruption concerns.
“If senior management is not sufficiently engaged, significant risks may not be effectively managed or addressed. It also dilutes the tone from the top,” said Erick M. Vega, SGV partner for fraud investigation and dispute services, in the statement.
“Having the basic compliance elements in place is not enough. Organizations need to improve the effectiveness of their risk assessments-responding quickly to new and changing risks,” he added.
SGV is a member firm of Ernst & Young Global.
Mr. Vega pointed to cybercrime as an emerging risk and said that half of the local respondents downplayed this — a sign that beyond the chief information officer, the rest of the C-Suite may not be giving the threat enough importance.
For more than two thirds, or 64%, hackers represented the biggest cybersecurity threat, discounting the risk from employees, contractors and spying by foreign nations.
Companies, said SGV, should thus make use of forensic data analytics and boards hold management accountable for the quality of risk assessments. Also a priority are “explicit escalation procedures”, training tailored to seniority/positions and budget support.
“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,” Mr. Vega said.
Globally, the Fraud Survey found that risks faced by businesses were not receding, as were the incidence of fraud and reported levels of corruption.
Among others, 6% of the 2,700 respondents worldwide were willing to justify misstating financial performance and 46% of chief financial officers (CFOs) — asked to pick from a list of questionable actions — said one or more were justifiable.
CFOs, general counsels, and sales and marketing executives were cited as more likely than other executives justify unethical activities when under pressure to meet certain targets.
“Unfortunately … our survey results over the past 10 years point toward a level of unethical conduct that businesses are unable to eradicate,” the Ernst & Young report states.
“They must instead to minimize its impact. They need to detect, investigate and remediate the actions of individuals within their organization who are prepared to act unethically.”
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