Article
Written by Nick Driver
Posted on 29/08/2014

Multinationals suffering from ‘compliance fatigue’

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Multinationals are suffering from ‘compliance fatigue’ as a result of tougher enforcement from regulators and increased pressure to stamp out practices that are seen as unethical. This is according to Ernst & Young’s (EY) 2014 Global Fraud Survey, which gathered the opinions of over 2,700 executives across 59 countries. 

 

More is expected from firms today

Higher expectations for companies has been linked directly to the financial downturn, as consumers and investors “have become more aware and increasingly intolerant of corporate conduct they perceive as unethical”, according to the survey. In this highly-scrutinised environment, the expectation would be for company boards to place greater focus on fraud prevention at all levels, but EY’s findings suggest otherwise. Today, C-suite executives are as likely to justify questionable behaviour as junior colleagues, as the same pressures to perform exist but with greater scrutiny from stakeholders. The knock-on effects of this extra burden are seen in other areas of the business, particularly when it comes to identifying emerging threats

Threats not being mitigated properly 
Less than 50 per cent of those surveyed saw cybercrime as a significant risk, while a significantly lower proportion of respondents were concerned by organised crime or “advanced persistent threats”. Whether this apparent disinterest in potentially damaging activities is a result of compliance fatigue or not, traditional fraud has not diminished. Reported levels of corruption and incidents of fraud are not diminishing, and perhaps more worrying is that a number of senior managers are willing to justify unethical actions. 

Managers justifying unethical behaviour to boost business
EY’s results show that six per cent of respondents (including C-suite executives) are happy to justify misstating their firm’s financial performance, and 42 per cent felt that offering bribes to win or retain business was acceptable.  Furthermore, there was a direct correlation between executive positions and a willingness to defend questionable behaviour when pressure to meet financial targets is high. 

The current culture is unsustainable
Executives may see their actions as a necessity to meet targets, but this approach is not sustainable in the long run, particularly with compliance increasing in prominence. What’s more, it is in direct conflict with appropriate reputation management, which threatens to do as much damage to a firm as the unethical activities that are being overlooked. 

Board members must ensure proper oversight is in place, and senior members need to be held accountable for their subordinates. With greater cohesion between senior members, compliance activities can be evenly distributed, lowering the fatigue felt by many today.  

 

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