Financial Services Ireland

Press Release

EY EMEIA Report: Fraud & Corruption – an easy option for growth?

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  • 50% of Irish respondents consider bribery and corruption widespread in Ireland (compared to 35% in Western Europe)
  • However, 60% state they do not feel they can report negative financial performance to head office management in an open and transparent way
  • 36% of Irish businesses are under pressure to move into higher-risk markets, with just 15% having procedures in place to check ownership of third parties from these markets.

Dublin: 7th October 2015: EY’s 14th EMEIA Fraud Survey, Fraud and Corruption – the easy option for growth?, has found that 50% of Irish participants believe bribery and corruption is widespread in Ireland.  Whilst only 1% of Irish respondents stated they would deliberately misstate their financial position, when asked, one third of Irish businesses considered entering some form of arrangement with suppliers to present a better financial position, justifiable.

The report also shows that 60% of respondents said that they do not feel that they can report negative financial performance to head office management, in an open and transparent manner.

Julie Fenton, Partner and Head of EY’s Fraud Investigation & Dispute Services (FIDS) practice in Ireland commented, “The picture painted by these statistics could lead to the conclusion that in Ireland, whilst no one would actively misstate their financial results where there is flexibility to present a better financial position through say delaying invoicing, they would take this option.  This coupled with the pressure of feeling that bad news cannot be reported can lead to an environment where non-compliance is seen as an option.

The report, which polled 3,800 employees of large companies in 38 countries, goes on to state that 35% of Irish respondents, whose businesses have experienced growth in the last two years, stated that they rate their company’s ethical standards when doing business as ‘very good, indicating that compliance and growth can work together’. However, 26% of overall respondents consider some form of financial misstatement had occurred in their company in the last twelve months.

An interesting point that can be drawn from the EY Fraud Survey from the last three years is a review of the percentage of Irish respondents who believed that offering cash payments was acceptable in order to help business survive:

  • 2015: 17%
  • 2014: 2%
  • 2013: 20%

Julie Fenton, also commented, “It is interesting to note that the difference in 2014, where respondents were drawn from the C-suite in our global survey versus 2015 and 2013, which was a broader business audience.  The above findings indiciate that anti-compliance messages might not be flowing through to all levels within companies and highlights the need for Management to ensure policy and ethics and understood across all levels of the business, and not just at top level.”

30% of Irish respondents report that their company does not have a whistle-blowing hotline, and of those that do have a hotline, only 28% believed that management would follow up on whistle-blowing reports. Fenton continued, “This further emphasises not only the need to implement effective and transparent policies and procedures across organisations but to clearly communicate how issues are actioned.  Employees need to be confident that whistle blowing activity is taken seriously.”

The report signals that 70% of Irish businesses are under pressure to create new revenue opportunities, with 36% of these under pressure to move into higher risk markets.  Moves into these markets create new business relationships with business partners not necessarily known to the business

Fenton said, “Businesses need to be alert to risks in new markets and they need to have policies that are fit for purpose in thse markets.  They also need to conduct due diligence activities, particularly on third parties they are working with in those markets. Only 15% of Irish respondents have a process in place to check the ownership of these third parties.  In the event an issue with a third party arises it is imperative a company can demonstrate they have properly investigated the background of that party.”

Our 5 priority actions for Management:

  • Implement an effective whistle blowing regime: If the whistle blowing procedures are not followed up upon then employees will assume, quite rightly, that management are not serious about promoting ethical behaviour or tackling wrongdoing. It is vital to ensure that a channnel for voicing concerns is not just there because the policy requires is, but that when someone contacts it, real and viable action is taken.
  • Perform rigorous due diligence on third parties: Every organisation you do business with can present risks around fraud, bribery and corruption. It is vital you know whether these entities will assist your company into the future or bring negative issues with them, hampering your companies efforts.
  • Words and Actions: Senior management should take every opportunity to communicate its commitment to ethical conduct within their companies and industry. This communication needs to be two-way, and needs to be reinforced by actions, especially relating to non-compliance.
  • Knowing what’s going on and make better use of your data: Accessing the right data to monitor activity and identify risks is easier said than done. However, exploiting data from across your business for compliance purposes can deliver benefits to a wider range of stakeholders.
  • Be proactive in tackling issues: It will almost always be a more painful experience if others identify wrongdoing before you do.

Fenton concluded, “Compared to other sectors and previous years survey reports, the results show that organisations have responded over the years and are doing more to focus on compliance and the behaviours of their staff – but there is still a huge gap. Growth can be achieved while appropriately managing risk of fraud and corruption so it is critical that senior management sustain a high level of engagement with the key issues facing them. Effective compliance is not a barrier to growth, it is a requirement for continued, and sustained success.”