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COVID-19 Headwinds Heighten Integrity Challenges For Emerging Markets: EY
32% of respondents in emerging markets believe that bribery and corrupt practices present the greatest risk to the long-term success of their businesses, compared with 25% in India.
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As organizations transition from managing the COVID-19 crisis toward building economic resilience, many are struggling to maintain integrity standards according to the EY Global Integrity Report — emerging markets perspective, Is this the moment for emerging markets to prioritize integrity? The report reveals that 63% of respondents believe businesses operating in emerging markets are more likely to be adversely impacted by the current disruption. This is higher in India where close to 82% respondents echo the sentiment.
Regulatory scrutiny and remote working as a result of the pandemic are aggravating these issues. 32% of respondents in emerging markets believe that bribery and corrupt practices present the greatest risk to the long-term success of their businesses, compared with 25% in India. 30% of respondents believe that the risk of a cyber and ransomware attack is a significant threat, compared to 41% in India.
Arpinder Singh, Partner and Head – India and Emerging Markets, Forensic & Integrity Services, EY said, “As organizations navigate the crisis and prepare for a ‘Great Reset’, corporate revival and recovery efforts should not get derailed by fraud, bribery corruption risks. Business leaders should go beyond today’s travails to review their integrity agenda and determine the next steps to bolster their risk and compliance programs. Leadership commitment to foster a culture of integrity and trust amongst stakeholders will be pivotal to derive long term value and preserve an ethical future.”
The report highlights four key areas for organizations to consider in order to better manage the risk of corporate misconduct:
· Corporate integrity should be top priority in management’s playbook
Business leaders are always in a crucial position when it comes to taking difficult decisions. The report highlights that 55% of respondents in emerging markets say their management frequently communicates the importance of operating with integrity, compared with only 39% in developed markets. This proportion varies significantly by country from just 25% in UAE, rising to 53% in Malaysia and 66% in India.
· Voicing misconduct through whistleblowing channels
37% of respondents in emerging markets say they haven’t reported concerns about integrity due to apprehensions about their career progression. Worryingly, nearly 3 in 10 kept their concerns private out of fear for their own personal safety. In India, 49% of respondents were uneasy to report such concerns. In a post COVID-19 world, businesses must make employees feel that they can safely report misconduct, provide protection to whistle-blowers to minimize any possible retaliation. Training and awareness programs should become the cornerstone in the corporate governance framework of organizations.
· Embracing disruptive technologies while protecting data
Emerging markets are embracing disruptive technologies and adapting to a digital life. While there has been an overwhelming shift to using new technologies and increased use of internet with work from home, the risk exposure for organizations has amplified. The report highlights that emerging markets are leading the way in mitigating growing risks, with 55% offering training to employees on how they can prevent data security breaches, compared with 45% in developed markets. Organizational preparedness is also robust in emerging markets with 42% of respondents having an incident response plan in the event of a data security breach – regions such as South Africa were at 56% while India at 32%.
· Tackling third party integrity risks
Remote working, restricted operations and limited mobility in many locations has also made it riskier to manage third-party relationships. Only 35% of businesses in emerging markets are very confident that their third-party partners operate with integrity, compared with 56% of respondents from India. Conducting adequate due diligence before onboarding a third-party vendor is critical to mitigate long-term risks and comply with enforcement standards. Technology solutions such as automated dashboards and data analytics can be enablers to bring efficiency into the third-party due diligence process.