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Companies Suffer Corruption Fatigue, Data Says

Tammy Whitehouse | June 11, 2014

Companies are putting out about the same effort to combat corruption and fraud, but executives believe the incidence is growing, suggesting some compliance fatigue may be setting in.

U.S. corporate executives say the incidence of fraud has doubled in the past two years, from 8 percent who said their organizations experienced a serious fraud in 2012 to 16 percent in 2014, according to EY's biannual global fraud survey. The results show that 40 percent of 2,700 executive in 59 countries believe bribery and corruption is widespread in their home country, with 22 percent of U.S. executives agreeing to that characterization in the United States. Six percent of all executives even said they could justify misstating company financial performance if necessary to weather a downturn.

One in five said they had been asked at some point to pay a bribe, and an equal number said they don't have an anti-bribery or anti-corruption policy within their companies. “Our sense is that fatigue is starting to set in,” says Brian Loughman, a leader in fraud investigation and dispute services for EY. “There's no doubt that regulation has increased and become more global. The risks are increasing, but the statistics in this survey show there hasn't been much change” in corporate compliance initiatives to combat the rising risk.

As examples, says Loughman, one in five companies don't have a formal anti-bribery/anti-corruption policy, and about 40 percent don't have a whistleblower hotline. Less than half of C-suite executives are likely to attend anti-bribery or anti-corruption training, the survey shows. “There's not a lot of change there in compliance,” he says. “Those percentages are fairly similar to what they've been in the past.”

Also disturbing, says Loughman, is the perceived risk around cybercrime. Less than half of respondents see cybersecurity as a serious concern. “That was surprising to me,” said Loughman. “A lot look at cyber issues and think that's the responsibility of the IT guy. That's not the case. There's probably some work to be done in terms of increasing awareness.”

The Institute of Internal Auditors recently released a practice guide for internal auditors offering guidance on assessing companies' efforts with respect to anti-bribery and anti-corruption. The guide identifies two key components of such programs and explains internal audit's responsibility in examining the company's efforts. “Internal auditors are very much attuned to the escalating risks bribery and corruption present to their organizations,” said Richard Chambers, IIA President and CEO, in a statement. “This new practice guide will enhance internal auditors' ability to proactively assess the effectiveness of their organization's efforts against corrupt practices.”