ETHICAL business practices are directly related to attracting and retaining talent in the Philippines, professional services firm SGV & Co. said, noting that roughly seven in 10 local respondents polled in a survey claimed they would be unwilling to work for companies and organizations involved in bribery and corruption.
The Ernst & Young (EY) Fraud Survey 2015 report titled “Fraud and Corruption—Driving Away Talent?” shows that fraud prevention is no longer just a legal and compliance issue but impacts recruitment, talent retention and business continuity. SGV & Co. is a member firm of EY Global.
Seventy-four percent of the 101 respondents from large organizations in the Philippines said they would be unwilling to work for or would leave an organization involved in a major bribery case.
This mirrors responses from the rest of the region, with 78 percent of 1,508 interviewed in 14 Asia Pacific markets similarly declaring they would be repelled by unethical business practices.
“These findings can be cause for concern, as recruiting and retaining a quality talent pool is critical for business success. This is yet another strong reason to manage fraud, bribery, and corruption effectively. Otherwise, companies will have to contend with high attrition rates and expensive recruitment campaigns,” said Roderick M. Vega, a partner in SGV’s Assurance practice under the Fraud Investigation and Dispute Services.
“It is essential that companies comprehensively address this via strong ethical leadership and a cohesive fraud prevention framework, with up-to-date and well-enforced internal controls, policies and procedures,” Vega said.
Anticorruption efforts
Companies that do step up antibribery and anticorruption (ABAC) policies are likely to win the support of their employees, the survey findings further showed.
Sixty-five percent of the local respondents disagree that ABAC policy will harm a business’ competitiveness in the Philippine market, compared to just 49 percent recorded for the wider Asia Pacific.
Sixty-one percent of local respondents-compared to just 41 percent in the region—also reported that regulatory activity in the past two years have had a positive impact on their organization.
A larger majority of respondents in the Philippines also reported promising implementation of ABAC in their organizations across five indicators. Eighty percent say senior management has strongly communicated its commitment to ABAC policies; 72 percent say senior management display high ethical standards; 67 percent say the organization has taken action against erring employees; 72 percent say the organization would support people who reported cases of suspected fraud, bribery, or corruption and 63 percent further say regulators have taken action against employees or organizations found to have breached policies.
These are all higher than the Asia Pacific results.
Nevertheless, there remains room for improvement.
Despite 84 percent of employees in the Philippines saying they have ABAC policies, only 65 percent have received related training.
Of those who have received training, 24 percent think it is not customized enough for local market and 28 percent say it should be more flexible to accommodate their local needs. Furthermore, although 72 percent of employees say their organizations would support whistleblowers, 37 percent are reluctant to use a whistle-blowing hotline due to insufficient legal protection and concern over confidentiality.
“It is clear that ABAC policies, codes of conduct and whistleblowing hotlines are not enough. Companies need to demonstrate and communicate about ethical behavior if they want to effect true change,” Vega said.
The report further concludes that the answer to increasing regulatory enforcement and stretched in-house compliance teams lies in leveraging big data through forensic data analytics (FDA).
The use of FDA enhances both the risk assessment and monitoring process to help companies identify potentially unethical activity and suspicious transactions.
Third-party risk mitigation
Besides the compliance of leadership and staff within an organization, companies would do well to step up efforts to keep third parties such as joint venture partners, distributors, agents and vendors in line.
More than two-thirds (66 percent) of the respondents think third parties are a risk to their business in relation to ABAC compliance.
But 73 percent of respondents are confident that their organization is effectively managing the fraud, bribery and corruption risks associated with these third parties.
“This confidence is misplaced given the legal and reputational exposure it creates,” said Vega. “Companies entering into a business relationship with a third party are advised to conduct as much due diligence as an acquisition, and should also extend their ethical framework to monitoring third-party behavior.
The survey also covered the topic of cyber attacks.
Thirty-seven percent of the local respondents said they were worried their organization would be at an increasing risk of cyber attacks over the next few years, while only slightly more than half (56 percent) of the respondents believed that their organization was fully prepared to protect itself against these threats.
“It’s close to impossible to prevent all cyber breaches; however, this doesn’t detract from the potentially catastrophic consequences of a cyber attack. Companies must implement a cyber breach response program that includes the entire ecosystem of the business, so that if they experience an attack they can quickly respond and recover,” Vega said.
“There has been significant change in the perception of how fraud and corruption are affecting businesses. Until now, incentives for getting compliance right have centered largely on minimizing financial loss and reducing reputational damage. The impact of fraud on an organization is much broader than ever before—failure to address the employee angle could greatly impact productivity and growth strategies and ultimately companies could lose their top talent,” he said.