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Johannesburg - Nearly 78% of South African executives believe that bribery and corruption are widespread in the country, according to EY’s 13th Global Fraud Survey.
This is just below the view in Nigeria (88%) and Kenya (87%) in terms of the perception of the pervasiveness of bribery and corruption.
Respondents included chief financial officers, chief compliance officers, general counsel and heads of internal audit.
The survey included in-depth interviews with more than 2 700 executives across 59 countries, including South Africa, Kenya, Namibia and Nigeria.
Nearly 40% of all global respondents believe that bribery and corruption are widespread in their country.
Ten percent of South African respondents said they have been asked to pay a bribe in a business situation.
With respondents portraying a business environment of pervasive corruption in many countries, it would appear that management and boards are struggling to respond to long-standing threats, let alone addressing emerging risks such as cybercrime.
“South African business also tends to underestimate the threat posed by cybercrime, with only 48% seeing it as a risk," said Sharon van Rooyen, director, fraud investigation & dispute dervices at EY in SA.
"This is somewhat troubling as cybercrime is definitely on the rise and ICT risk is specifically identified as a board responsibility in King III.”
Threat by foreign states
However, South African respondents display a greater awareness of the threat posed by foreign states. About 10% see them as a risk and organised crime regarded by 40% among SA respondents as a risk, compared to 25% globally.
“Underestimating the risk and effect of cybercrime further impacts the effectiveness and efficiency in which companies respond to cyber incidents,” said Salome Coetsee, associate director for forensic technology & discovery dervices at EY in SA.
“Failure to respond adequately may cause significant reputational and financial damage.”
Twenty-one percent of CEOs said that they had been approached to pay a bribe in the past.
Worryingly, given their role in setting an ethical tone from the top, a significant minority (11%) of CEOs considered misstating financial performance to be justifiable in order to help a business survive an economic downturn, compared with 6% of all respondents.
“The formation of social and ethics committees as required by the new Companies Act may in time help to enhance the board’s ability to monitor and manage the company’s ethics as required by King III,” said Van Rooyen.
And according to Coetsee companies should improve their use of sophisticated forensic data analytics, analysing both structured and unstructured data, using text mining techniques and statistical analysis.
Compliance fatigue sets in
The survey also found that compliance fatigue within businesses appears to have set in at a time when they can least afford it.
One in five businesses still do not have an anti-bribery or anti-corruption (Abac) policy and 45% of organisations have not introduced a whistleblowing hotline.
Fewer than 50% of respondents have attended Abac training and fewer than a third of businesses are conducting anti-corruption due diligence as part of their mergers and acquisitions process.
South Africa broadly follows these trends. While the majority of SA companies (90%) have Abac policies and codes in place, only 24% of respondents had attended Abac training, well below the global average of 47%.
Only 48% of SA companies have a whistle-blowing hotline.
Van Rooyen believes these factors contribute to the extent of bribery and corruption in the South African business environment.
Only 47% of South African respondents agreed that people had been penalised for contravening the anti-bribery and -corruption codes and policies, substantially down from 62% in 2012,” she said.
Van Rooyen warned that key international trading partners are increasingly concerned about bribery and corruption.
South African companies operating internationally will have to improve their compliance and manage their ethics more effectively to avoid sanction.
“King III made our country a world leader in governance theory, but it’s clear that local boards still have considerable work to do in putting that theory into practice properly,” said Van Rooyen.
- Fin24
This is just below the view in Nigeria (88%) and Kenya (87%) in terms of the perception of the pervasiveness of bribery and corruption.
Respondents included chief financial officers, chief compliance officers, general counsel and heads of internal audit.
The survey included in-depth interviews with more than 2 700 executives across 59 countries, including South Africa, Kenya, Namibia and Nigeria.
Nearly 40% of all global respondents believe that bribery and corruption are widespread in their country.
Ten percent of South African respondents said they have been asked to pay a bribe in a business situation.
With respondents portraying a business environment of pervasive corruption in many countries, it would appear that management and boards are struggling to respond to long-standing threats, let alone addressing emerging risks such as cybercrime.
“South African business also tends to underestimate the threat posed by cybercrime, with only 48% seeing it as a risk," said Sharon van Rooyen, director, fraud investigation & dispute dervices at EY in SA.
"This is somewhat troubling as cybercrime is definitely on the rise and ICT risk is specifically identified as a board responsibility in King III.”
Threat by foreign states
However, South African respondents display a greater awareness of the threat posed by foreign states. About 10% see them as a risk and organised crime regarded by 40% among SA respondents as a risk, compared to 25% globally.
“Underestimating the risk and effect of cybercrime further impacts the effectiveness and efficiency in which companies respond to cyber incidents,” said Salome Coetsee, associate director for forensic technology & discovery dervices at EY in SA.
“Failure to respond adequately may cause significant reputational and financial damage.”
Twenty-one percent of CEOs said that they had been approached to pay a bribe in the past.
Worryingly, given their role in setting an ethical tone from the top, a significant minority (11%) of CEOs considered misstating financial performance to be justifiable in order to help a business survive an economic downturn, compared with 6% of all respondents.
“The formation of social and ethics committees as required by the new Companies Act may in time help to enhance the board’s ability to monitor and manage the company’s ethics as required by King III,” said Van Rooyen.
And according to Coetsee companies should improve their use of sophisticated forensic data analytics, analysing both structured and unstructured data, using text mining techniques and statistical analysis.
Compliance fatigue sets in
The survey also found that compliance fatigue within businesses appears to have set in at a time when they can least afford it.
One in five businesses still do not have an anti-bribery or anti-corruption (Abac) policy and 45% of organisations have not introduced a whistleblowing hotline.
Fewer than 50% of respondents have attended Abac training and fewer than a third of businesses are conducting anti-corruption due diligence as part of their mergers and acquisitions process.
South Africa broadly follows these trends. While the majority of SA companies (90%) have Abac policies and codes in place, only 24% of respondents had attended Abac training, well below the global average of 47%.
Only 48% of SA companies have a whistle-blowing hotline.
Van Rooyen believes these factors contribute to the extent of bribery and corruption in the South African business environment.
Only 47% of South African respondents agreed that people had been penalised for contravening the anti-bribery and -corruption codes and policies, substantially down from 62% in 2012,” she said.
Van Rooyen warned that key international trading partners are increasingly concerned about bribery and corruption.
South African companies operating internationally will have to improve their compliance and manage their ethics more effectively to avoid sanction.
“King III made our country a world leader in governance theory, but it’s clear that local boards still have considerable work to do in putting that theory into practice properly,” said Van Rooyen.
- Fin24
