A majority of executives feel their Boards are increasingly concerned about their personal liability from fraud, bribery and corruption, however, such executives believe that their Boards are not sufficiently prepared to deal with the new risks from fraud and corruption as companies return to growth.
A recent survey of more than 1400 CFOs and heads of internal audit, legal and compliance in major companies across 36 countries found that 81 per cent of Australian executives believe that their Boards are worried about this issue, as well as executives in Latin America (95 per cent), the Middle East and Africa (87 per cent) and Central and Eastern Europe (84 per cent).
The survey, which was conducted by Ernst & Young, also found that fraud appears to be increasing significantly in some regions. For example, in Western Europe, the number of companies that had experienced a significant instance of fraud in the past two years increased from 10 per cent to 21 per cent. Fraud levels also remain high in Latin America (21 per cent) and the Middle East and Africa (18 per cent).
“Increased enforcement against fraud, bribery and corruption is a priority in many major markets,” said David Stulb, Ernst & Young’s global fraud investigation & dispute services leader.
“Individual executives and directors will not be immune from prosecution.”
However, despite Boards’ concern, they do not appear to be behaving in a way that would increase their own protection.
Worryingly, only four out of ten CFOs had been asked to perform a review of anti-fraud and corruption controls in the previous 12 months, and only 28 per cent had been asked to produce a fraud risk assessment.
“Given the pressure on corporate resources, prioritising anti-fraud and anti-corruption efforts is essential,” said Stulb.
“Regularly scheduled assessments of risks in particular businesses and markets are prudent and help those in risk management functions to triage the most pressing situations.”
Having coped through the downturn, many companies are now looking for new growth opportunities, which may come through entering new markets or making acquisitions.
These efforts can expose companies to numerous new risks, potentially including corruption issues. To minimise such risks, businesses have to undertake thorough, focused pre-acquisition due diligence.
The survey found that up to 54 per cent of companies in Australia undertake post-acquisition due diligence, which compared well against Japan (40 per cent) and Central and Eastern Europe (38 per cent).
“When growth returns, we expect more challenges, more potential for fraud, more exposure to corruption and more interest from regulators,” said Stulb.
“In the coming months, if they haven’t done so already, companies will need to review or improve their procedures to achieve long term sustainable and ethical growth.”
News