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Pandemic worsens integrity in businesses — Survey

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The Covid-19 pandemic has not just periled operations of businesses throughout the world but even affected the stance of integrity in enterprises, as the majority of surveyed respondents, including company board members, said the contagion makes it more difficult to carry out business with integrity.

According to the 2022 EY Global Integrity Report, released by the leading and largest professional services firm in the Philippines, SGV & Company, it said that 55 percent of respondents believe standards of integrity have either stayed the same or worsened in the last 18 months.

Further, the survey disclosed that 41 percent of respondents and 54 percent of enterprises’ board member respondents say that the Covid-19 pandemic makes it more difficult to carry out business with integrity, while a record-high 97 percent of respondents agree it is important that their organization demonstrates corporate integrity.

The survey, which canvassed the views of more than 4,700 employees, managers and board directors from 54 countries and territories, found that leaders are having a hard time creating and communicating a strong and effective culture of integrity within their businesses.

Moreover, the report noted that more than four in 10 board member respondents (42 percent) agree that unethical behavior from senior managers and high performers is tolerated in their organizations (up from 34 percent in 2020). In addition, more board members (34 percent) agree that it is easier to bypass business rules in their organization than in 2020 (25 percent).

“The Covid-19 pandemic has had a serious impact on integrity standards for companies around the world. The change to ways of working throughout the Covid-19 pandemic has created a heightened risk of fraud and unethical behavior. Hybrid working makes it difficult to undertake effective compliance monitoring, and fraud risk factors typically increase at a time of crisis because companies and individuals face more financial pressures,” according to Andrew Gordon, EY Global Forensic & Integrity Services Leader.

Tolerance to improper behaviors
In a separate disclosure, Roderick Vega, SGV Global Forensic & Integrity Services Leader, stated that while the Philippines was not covered by the survey, they believe that there are many interesting insights from the EY Global Integrity Report that Philippine companies can learn from.

“While almost all the survey participants reiterate that integrity is important, we should also note that there has been slippage on compliance, and increased willingness for Board members and senior management to tolerate improper behaviors because of the challenging work environment. More tellingly, the report shows a gap between the perceptions of Board members versus those of employees on how organizations measure integrity. Policies, processes, controls and technologies are important but people engagement and education on integrity should remain the priority of a company’s governance efforts,” he said.

Failure to address unethical behavior
The same survey has yielded results that in the last 12 months, there has been greater investment in integrity and compliance initiatives, in which 53 percent of responding organizations have a code of conduct in place, compared with 47 percent 18 months ago.

There is also an uptick in training programs, with 46 percent of businesses providing regular training on relevant legal regulatory or professional requirements, compared with 38 percent in 2020.
However, the survey highlighted that these increased investments are not being communicated effectively and senior management is often over-confident in the effectiveness of its corporate integrity programs.

For instance, while 60 percent of board member respondents say that their organization has communicated the importance of behaving with integrity frequently in the last 18 months, less than a third (30 percent) of employee respondents remember seeing any communications on the topic.

There is also a gap between the views of board members and employees in relation to awareness of policies on working from home (80 percent vs 51 percent) and awareness of training on data privacy regulations (52 percent vs 35 percent).

“Although organizations are investing more in communication and training programs, this is not enough. There is a worrying divide between investment in action and genuine change. A strong culture of integrity is vital, and businesses must review what is working and where there are issues to address,” according to Gordon.

Along with a lack of awareness, there appears to be a limited understanding of the critical importance of integrity, beyond compliance with rules and regulations, as only a third (33 percent) of respondents say that an important characteristic of integrity is behaving with ethical standards.

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