Bribery and Corruption Continue their rampage

indiaCSR logo80% of respondents state that bribery and corrupt practices happen widely in business, 66% state that some form of bribery is ‘justifiable’, 59% claim that companies often report their financial performance as better than it is

IndiaCSR News Network

Businesses today are operating in a volatile environment, while simultaneously battling market pressures to thrive in a challenging playing field. EY’s Europe, Middle East, India and Africa (EMEIA) Fraud Survey, Fraud and corruption – the easy option for growth?, states that managing fraud, bribery and corruption risks are perceived as impediments to growth in India.

The India findings reveal that 35% of the respondents state that conformity to their organization’s anti-bribery and anti-corruption policies would harm their competitiveness in the market. 57% said that increased regulation in their sector is augmenting challenges for the growth or success of their business. Moreover, 66% state that some form of bribery such as giving cash gifts, entertainment etc. is acceptable – an increase from 59% in the last EMEIA Fraud Survey 2013.

Arpinder Singh, Partner and National Leader, Fraud Investigation & Dispute Services, EY stated,

“We have been witnessing a spurt of change being driven by regulators and this has undoubtedly made a positive impact on the Indian business environment. Change, as always, takes time to set in and the overall sentiment which the EY EMEIA Fraud Survey 2015 survey brings about, borders on the reluctance to change old ways, traditionally thought of as acceptable ways of doing business”

“Irregular practices like booking revenue from rebates with suppliers early still continue to be rampant. However, the survey does indicate that there is enhanced awareness about ethical business practices and that acceptance seems to be setting in, though it may take time” he added.

EY’s Fraud Investigation & Dispute Services practice conducted the EMEIA Fraud Survey 2015 to assess the reality of the threat of fraud, bribery and corruption across the region. The key India findings include:

Businesses are operating in an exceptionally challenging environment

1. Markets are not recovering as expected and some remain highly volatile.67% of respondents felt that India has been achieving economic growth which is slower than expected.

2. Economic sanctions are more complex and require greater effort for businesses to comply.37% of Indian respondents stated that they are uncertain about their ability to trade due to economic sanctions and export controls.

But management is under increased pressure to find new ways to grow their business

1. 81% said that managers are under increased pressure to identify new revenue opportunities

2. 66% believe that the pressure to venture into higher risk markets is high

Manipulation of financial results is prevalent

1. 40% of overall respondents believe companies in their market often exaggerate financial performance

2. 1 in 5 senior managers have recently observed early recognition of revenue

3. 59% opine that companies often report their financial performance as better than it is.

Fast track techniques for rapid growth may lead to unnecessary risk-taking behaviour

1. 80% of the India respondents believe that bribery and corrupt practices happen widely in relation to business

2. 59% of the respondents deem offering personal gifts, cash payments or entertainment as acceptable.

But effective compliance is a requirement for sustained success

1. The results show a clear correlation between companies that have experienced revenue growth and those that are seen by respondents as having more robust compliance programs

2. Respondents that report revenue growth in their business in the past two years are:

3. 34% rate their company’s ethical standards as ‘very good’

4. 40% of overall respondents believe companies in their market often exaggerate financial performance

Good practices yet to catch up

1. Some businesses still appear to lack the basic ‘building blocks’ in place for effective compliance

2. 66% do not rate their company’s ethical standards when doing business as very good

3. 35% of the respondents indicated that following their anti-bribery and anti-corruption policy very closely would harm their competitiveness in the market.

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