- EY’s Global Integrity Report shows growing pressures on ethical conduct in emerging markets
- 62% of respondents believe it is difficult for organizations to maintain integrity standards in difficult economic conditions
- Deteriorating market conditions (36%) and declining financial performance (31%) are the top risks to ethical conduct in emerging markets
Corporate integrity standards in emerging markets are under threat from a range of new pressures on businesses, according to the EY Global Integrity Report 2022 – Emerging Markets Perspective: “Is your organization meeting its integrity standards? ?
The report collected the opinions of more than 2,750 employees, managers and directors from 33 emerging markets and found that the current geopolitical and economic environment – in the aftermath of the COVID-19 pandemic – poses a significant threat to ethical conduct. Business.
Sixty-two percent of respondents say it is difficult for organizations to maintain integrity standards in times of rapid change or challenging market conditions, and nearly half of respondents (46%) say the impact of the pandemic has made it more difficult to act with integrity.
Specifically, the greatest risks to ethical conduct resulting from the pandemic are deteriorating market conditions (36%), declining financial performance (31%) and reduced employee compensation (29%).
Arpinder Singh, EY Global Markets and India Leader, Forensic & Integrity Services, says:
“Organizations currently face many challenges, which have increased the risk of unethical behavior. Rising geopolitical tensions, supply chain disruption and recent inflationary pressures have hit businesses in emerging markets around the world. around the world as they seek to recover from a global pandemic that has yet to run its course.
The results also show that a growing number of employees would be willing to compromise ethical standards for their own benefit. More than half of board members (52%) and almost half of senior executives (47%) surveyed in emerging markets agree that there are executives within their organization who would sacrifice integrity for short-term financial gain.
Additionally, 13% of board members surveyed and 14% of senior executives surveyed admit they would offer or accept a bribe, while 14% and 12%, respectively, would falsify financial records, versus only 4% of other employees surveyed.
Singh says, “It’s important to recognize that it’s people — not systems and processes — that commit fraud. Employees are more likely to behave with integrity if they understand why and how the company does things, rather than just being expected to follow the rules. Especially in today’s challenging economic environment, leaders must set a strong example of ethical conduct for employees. If they don’t, we’re likely to see a continued increase in the number of reported fraud incidents and regulatory interventions.
The results also suggest that emerging markets need to encourage a stronger culture of speaking up among staff. While 39% of respondents say it has become easier for employees to report issues, 36% admit to having had issues that they chose not to report.
Additionally, nearly a third of respondents (31%) say they do not report wrongdoing because they fear for their personal safety. These security concerns are particularly strong in Kenya (50%), Nigeria (48%), South Africa (41%) and India (41%).
Singh says, “Employees can play a pivotal role in identifying and reporting wrongdoing, but the survey shows many don’t feel comfortable or safe doing so. It should be a priority for all leaders to ensure that employees feel they can speak up about wrongdoing and that whistleblowing and accountability are part of the cultural fabric of their organizations.
Despite concerns about current pressures on ethical conduct, the survey shows that strong progress has been made in emerging markets. Almost all respondents (97%) agree that corporate integrity is important and almost half (47%) believe corporate integrity standards have improved within their organization over the past two years. A similar number (45%) say they receive regular training on relevant legal, regulatory or professional requirements, up from 39% in 2020. And nearly a third (31%) of respondents say they have incentives in place to encourage behaviors that demonstrate integrity.
Singh says, “Creating a culture where ethical behavior is supported and rewarded can help reduce regulatory risk, improve employee morale, and build stakeholder confidence in a company’s ability to meet its promises.
“Consumers, regulators and investors demand transparency and want to see clear improvements. Business leaders in emerging markets must therefore remain vigilant and take steps to promote corporate integrity. In doing so, they will help deliver short- and long-term value to all stakeholders. »
For more information visit: ey.com/emergingmarketsreport2022
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About the survey
Between June and September 2021, researchers – global market research agency Ipsos MORI – conducted 2,756 local language surveys of board members, senior executives, managers and employees in a sample of the largest organizations and public bodies in 33 emerging markets.
The countries covered in the report are Argentina, Brazil, Chile, Colombia, Mexico, Peru, Lithuania, Latvia, Estonia, Czech Republic, Hungary, Poland, Romania, Russia, Serbia, Slovakia, Ukraine, India, Israel, Kenya, Nigeria, Saudi Arabia, South Africa, Turkey, United Arab Emirates, China, Hong Kong, Malaysia, Singapore, South Korea, Taiwan, Thailand and Vietnam.