Bribery, corruption and fraud on the rise due to covid-19

07 April 2020 Consultancy.com.au

The degree of fraud, corruption and financial crime is expected to rise in the coming period, now that Australian organisations and people are turning most of their efforts towards grappling with the coronavirus.

The recently released Bribery & Corruption report from Big Four accounting and advisory firm Deloitte already reported an increase in perceived corruption across Australia, based on surveys conducted with risk leaders in Australia & New Zealand between October and December last year. The circumstances that have unfolded since then have compounded an already deteriorating situation.

Deloitte Australia’s Director of Forensic & Risk Advisory Oliver May said, “As markets reel from the impact of Covid-19, uncertainty and anxiety may well trigger an increase in risky behaviour. As the threat to livelihoods accelerates, so do the vulnerabilities to dishonesty.”

Risk perception of bribery & corruptionAustralia’s economy, much like several others, is expected to take a devastating hit from the economic disruption caused by the coronavirus, which means the livelihoods under threat are only likely to increase. May explained that a single individual within an organisation could enhance the risk factor.

“Fraudsters, cybercriminals, organised crime groups and corrupt individuals will test an organisation’s commitment to integrity. Employers need to support their people, organisations and the wider community by making sure they have anti-bribery policies and programs in place,” said May.

Deloitte’s report paints a scenario of increasing corruption in Australia, based in part on the country’s fall in rankings on Transparency International’s Corruption Perceptions Index. The index evaluates countries based on the level of corruption perceived in their public sector. New Zealand performs relatively well on the index, remaining among the countries with the least corruption perceptions.

How many instances of suspected bribery and/or corruption has your organisation experienced in the past twelve months?Risk leaders are particularly concerned in such and environment, for fear of their organisation being associated with incidents of corruption. Deloitte reports the advent of what is termed as the ‘reputation economy,’ where the “ethics, professionalism and integrity of an organisation weighs heavily on its profit and loss statement.”

As the importance of reputation has increased, so to has the likelihood of corruption, particularly as businesses expand and are faced with the regulatory and professional environment in foreign markets.

Risk factors

Through the course of Deloitte’s survey, risk leaders in Australia and New Zealand identified a set of key risk factors that might cause trouble if the status quo is maintained. Most of these relate to inaction at the top rungs of an organisation when it comes to anti-bribery and corruption measures.

For some, this risk is glaringly obvious, with 5% of respondents indicating that their organisation’s leadership had not endorsed a “no-tolerance approach” to bribery and corruption. More than 10%, meanwhile, said that if such a stance exists it has not been clearly communicated to the staff.

How does leadership actively demonstrate its commitment to a no-tolerance approach to bribery and corruption? This relates closely to organisational culture, which is also a key risk factor identified by respondents. Less than a third of respondents indicated that anti-bribery and corruption principles were embedded within their organisational culture, calling for more investment in this area.

Speaking of a lack of investment, most organisations appear to have skimped on their investments in anti-corruption checks, whether this is in the more advanced form of data analytics to detect incidents, or the more simple investment of conducting a bribery and corruption risk assessment. Even mechanisms to detect a conflict of interest within the staff remain half-baked, despite the fact that most risk leaders reported this amongst their top three concerns when it comes to bribery and corruption.

Organisations continue to rely on self-disclosure processes, among other mechanisms of limited effect, to detect conflicts of interest. Risk leaders call for this to change, and technology is touted to have a significant role to play in this. A large number of risk leaders are also weary of third-party risks to their reputation.

Top bribery & Corruption risks

This risk becomes even more pronounced when businesses collaborate with more foreign markets, as third party suppliers and vendors might engage in practices that are in violation of certain regulatory standards. Only a quarter of respondents were confident that people along their supply chain and other agents were not engaging in bribery and corruption.

Organisations seem to have considerably more confidence in their own employees, given that due diligence mechanisms are already in place. However, the fear that employees might engage in corrupt practices is also a risk that weighs on the mind of some leaders.

Building on the survey findings, Deloitte’s experts urge businesses to use the Covid-19 crisis as a wake up call to evaluate the risk profile of their organisation and shore up against vulnerabilities.

Chris Noble, Deloitte’s Managing Partner of the Forensic Practice in Australia and the Asia Pacific, said “Across Australasia and the Asia Pacific region, I encourage business leaders to recognise this time as one where your ethics will be well and truly tested. Clear, confident, unequivocal communication is so important to ensure the sustainability of your business and protect its reputation. The decisions leaders make now will affect their organisations long after the crisis has passed.”


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