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Corporate India’s Ethical Challenges Accelerated By The COVID-19 Crisis: EY Global Integrity Survey 2020
The survey research reveals insights from business leaders on the myriad of ethical challenges facing organizations, both in the lead-up to and at the height of the COVID-19 crisis.
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The COVID-19 crisis has magnified the risk of unethical conduct in corporate India as businesses face severe and widespread disruption in operations, supply chains and workforce, states EY’s Global Integrity Survey 2020, Is this the moment of truth for corporate integrity? Declining financial performance (37%), disruption to traditional working patterns (36%), reduced focus on ethical behaviour from senior management (34%) and weakening compliance processes and controls (20%) are some of the greatest risks to ethical business conduct because of the pandemic. Over one third of the respondents believe that unethical behaviour will increase further. The survey further states that 64% believe that unethical behaviour is often tolerated when involving seniors or high performers.
Arpinder Singh, Partner and Head – India and Emerging Markets, Forensic & Integrity Services, EY said, “The COVID-19 pandemic struck the business ecosystem to its core, propelling management to deal with operational distress and business continuity with urgency. As tough decisions are being taken amid the crisis, the risk of unethical behaviour and compliance infractions has increased and can weigh heavily on organizations. Turbulent times like these can have corporate integrity becoming a true differentiator as organizations concentrate on encouraging ethical conduct, building trust in third party partnerships, protecting data and circumnavigating the risks present now, next and beyond.”
The survey research reveals insights from business leaders on the myriad of ethical challenges facing organizations, both in the lead-up to and at the height of the COVID-19 crisis. Key survey findings for India include:
Unethical conduct on a downward spiral
A significant number of employees remain willing to act unethically for personal financial gain, and the global pandemic is only exacerbating this by increasing the incentives and opening new avenues for them to do so. Senior employees are more likely to justify unethical behaviour such as ignoring misconduct in their team, misleading external parties or offering/accepting a bribe to boost their own career progression or remuneration. COVID-19 and the ensuing economic crisis will uncover their unethical behaviour and actions, leaving organizations exposed to the threat of reputational damage and financial losses.
- 69% believe that there are managers in the organization who would sacrifice integrity for short term financial gain. This was higher than the global figure which stood at 43%.
- 57% would be prepared to act unethically to improve their career progression or remuneration package. 32% would be willing to falsify customer records, 31% would ignore unethical conduct by third parties and 29% would provide false information to management.
- 77% state that integrity standards have improved in their organization in the last two years, and 90% say it is important to be able to demonstrate that their organization operates with integrity
- However, 92% say they would be concerned if information about decisions taken by management were subject to public scrutiny, much higher that global (54%)
Integrity issues soar during mergers and acquisitions
Organizations can face significant risk during mergers and acquisitions (M&A), joint ventures, when partnering with or investing in other businesses. As investors start to look again to the emerging markets for greater returns, it is important to remember that integrity plays a significant role in M&A due diligence.
- Globally, 95% of respondents believe integrity-related risks are among the most significant when undergoing a transaction
- According to respondents from India, future commercial viability (27%), management’s integrity at the acquired organization (24%) and fraudulent business activities (21%) are some of the key risks in M&A
- Only 37% conduct detailed background checks on promoters or key management personnel
- Only 31% perform compliance or integrity related reviews, and 26% conduct bribery and corruption reviews before buying another organization
Data breaches and privacy risks in the new normal
COVID-19 has increased data security risks as the shift to employees working remotely provides significant opportunities for cybercriminals to target unwitting employees who are not prepared to handle sensitive data securely.
- Cyber-attacks and ransomware (36%) and pandemics (36%) are perceived as the greatest risks to the long-term success of organizations, followed by bribery and corruption (24%) and fraud (21%)
- Only 56% train employees on applicable data privacy regulations, such as the General Data Protection Regulation (GDPR)
- Only 32% had an incident response plan in the event of a data security breach
- Only 47% conduct data security audits of suppliers and 41% perform Privacy Impact Assessments
- 68% say that the current data protection and privacy legislation is a barrier to the success in business
- A majority (90%) say the level of enforcement of data protection and privacy legislation will increase in future