- EY’s Global Integrity Report shows the growing pressure on ethical behavior in emerging markets
- 62% of respondents believe that maintaining integrity standards in difficult economic conditions is a challenge for companies
- Deteriorating market conditions (36%) and declining financial results (31%) are the top risks to ethical behavior in emerging markets
According to the 2022 EY Global Integrity Report – Emerging Markets Perspective, corporate integrity standards in emerging markets are under threat from a range of new business pressures: “Is your organization on track to meet its integrity standards?”
Gathering the views of more than 2,750 employees, managers and board members from 33 emerging markets, the report found that the current geopolitical and economic environment – post-COVID-19 pandemic – poses a significant threat to ethical business conduct.
62% of respondents say organizations find it challenging to maintain standards of integrity in times of rapid change or difficult market conditions, and nearly half of respondents (46%) say the impact of the pandemic has made it difficult to act with integrity.
Specifically, the top risks to ethical behavior arising from the pandemic are worsening market conditions (36%), declining financial performance (31%), and cuts in employee compensation (29%).
Arpinder Singh, EY Global Markets and India Leader, Forensic & Integrity Services says:
“Organizations are currently facing many challenges that have increased the risk of unethical behavior. Rising geopolitical tensions, supply chain disruptions and recent inflationary pressures have hit companies in emerging markets around the world as they try to recover from a global pandemic that has yet to run its course.”
The results also show that more and more employees would be willing to compromise ethical standards for their own benefit. More than half of the board members surveyed (52%) and almost half of senior managers (47%) in emerging markets agree there are managers in their company who would sacrifice integrity for short-term financial gain.
Additionally, 13% of board members and 14% of executives surveyed admitted they would offer or accept bribes, while 14% and 12% would falsify financial records, respectively, compared to just 4% of other employees surveyed.
Singh says: “It is important to recognize that people – not systems and processes – commit fraud. Employees are more likely to behave with integrity when they understand why and how the company does things, rather than simply being expected to follow the rules. Especially against today’s background of economic challenges, managers must set a strong example of ethical behavior that employees can use as a guide. If not, we will likely see a further increase in reported fraud incidents and regulatory intervention.”
Findings also suggest that emerging economies need to foster a stronger culture of expression among employees. While 39% of respondents say it has become easier for employees to report concerns, 36% admit they had concerns that they did not 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 high in Kenya (50%), Nigeria (48%), South Africa (41%) and India (41%).
Singh says: “Employees can play a crucial role in identifying and reporting wrongdoing, but the survey shows that many do not feel comfortable or safe doing so. Ensuring that employees feel empowered to report wrongdoing and that whistleblowing and accountability are part of the cultural fabric of their organizations should be a priority for all leaders.”
Despite concerns about current pressures on ethical behavior, the survey shows that significant progress has been made in emerging markets. Almost all respondents (97%) agree business integrity is important, and nearly half (47%) believe business integrity standards in their organizations have improved 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 to do so Behaviors that encourage demonstrating integrity.
Singh says, “Creating a culture that supports and rewards ethical behavior can help reduce regulatory risk, improve employee morale and build stakeholder confidence in a company’s ability to deliver on its promises .
“Consumers, regulators and investors are demanding transparency and wanting to see significant improvements, so business leaders in emerging markets must remain vigilant and take steps to protect business integrity. In doing so, they will help create both short- and long-term value for all stakeholders.”
For more information, visit: ey.com/emergingmarketsreport2022
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Embedding integrity in a company’s strategic vision and day-to-day operations is critical when tackling complex issues such as fraud, regulatory compliance, investigations and business disputes. Our international team of more than 4,000 forensics and technology professionals helps business leaders balance business goals and risk, build data-centric ethics and compliance programs, and ultimately develop a culture of integrity. We consider your unique circumstances and needs to create the right multidisciplinary and culturally-aligned team for you and your legal advisors. We strive to offer you the benefits of our leading technology, deep expertise and extensive global industry experience.
About the poll
Between June and September 2021, researchers – global market research agency Ipsos MORI – conducted 2,756 surveys in the local language of board members, officers, managers and employees in a sample of the largest organizations and public bodies in 33 emerging countries.
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.