COVID-19 amplifies integrity challenges for businesses in emerging markets: EY

Saudi Arabia – 18 April 2021: As organizations transition from managing the COVID-19 crisis towards building economic resilience, the EY Global Integrity Report 2020 reveals some diversity regarding the impact on company ethics. The findings are part of a survey highlighting the views of 2,948 board members, managers, and employees from emerging markets around the globe. In the Middle East, the survey covers interviews with 175 respondents in the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA).

The report reveals that 63% of global respondents believe that businesses operating in emerging markets are likely to be impacted adversely by the current disruption.

The survey also highlights that regulatory scrutiny and remote working aggravate these issues. A total of 32% of global respondents in emerging markets said they believe that bribery and corrupt practices present the greatest risk to the long-term success of their businesses, roughly on a par with 30% of respondents in the UAE and 31% in KSA.

Globally, 30% of respondents believe that a cyber and ransomware attacks are a significant risk to the long-term success of organizations. This is lower than in KSA, where 32% believe it is a threat, but is significantly higher than in the UAE, where only 15% expressed concerns.

Mohammad Malkawi, KSA Forensic & Integrity Services Leader at EY, said:

“The disruption caused by COVID-19 poses a risk to ethical business conduct, making it imperative for corporations and firms of all sizes to continue being vigilant on compliance related issues. This holds true for organizations around the globe, as well as in the UAE, KSA and elsewhere around the region. Business leaders must make a firm commitment to encourage a culture of integrity and trust among all stakeholders. Particular attention must be placed towards risks of fraud, bribery and corruption, the threat of cyber attacks, and a constantly evolving regulatory environment. Ultimately, this will be the key towards creating long-term value and ensuring stability.”

The report highlights four key areas that organizations should consider to manage the risk of corporate misconduct more effectively:

Corporate integrity should be a top priority in management’s playbook

Business leaders are in a key position when it comes to taking difficult decisions. The report highlighted that 55% of global respondents in emerging markets say that their management communicates frequently with them on the importance of operating with integrity.

Voicing misconduct through whistleblowing channels

Globally, 37% of respondents in emerging markets say that they not reported concerns about integrity due to apprehensions about their career progression.

In the UAE, 29% reported keeping concerns to themselves because they were concerned about their future career. A slightly larger figure – 31% – said they felt like their concerns would not be acted upon. In KSA, 27% said they stayed quiet as a result of career concerns, compared to 39% who felt their concerns would not be acted upon.

In a post-pandemic environment, businesses must take steps to ensure that employees feel comfortable reporting instances of misconduct and protect would-be whistle-blowers from retaliation of any kind. Training and awareness programs should become institutional pillars in the corporate governance framework of organizations.

Embracing disruptive technologies while protecting data

Around the world, emerging markets are embracing new and disruptive technologies and adapting towards a general shift towards the digital realm. This shift, however, brings with it a host of potential security problems and amplifies risk exposure for organizations. Notably, the report showed that in emerging markets, 55% offered training to employees on prevention of data security breaches, compared to 45% in developed markets, leading the way to mitigate risks. Emerging markets also performed well with regards to organizational preparedness, with 42% of global respondents having an incident response plan in place.Tackling third party integrity risk

The need to establish remote working protocols in many locations as a result of the pandemic has also made it riskier to manage third-party relationships – and conducting adequate due diligence before onboarding a third-party vendor is critical to mitigate long-term risks. According to the survey results, 35% of businesses in emerging markets are confident that their third-party partners operate with integrity. This was even higher in KSA – with 43% of respondents comfortable with the integrity of their third-party partners, but markedly lower in the UAE, where only 20% of businesses reported confidence.

Charles de Chermont, UAE Forensic & Integrity Services Leader at EY, added:

“The results show that many businesses around the world have faced challenges when it comes to maintaining integrity as they build a pathway towards economic recovery. However, there are reasons to be optimistic. Around the world – and in the UAE and KSA in particular – companies are recognizing the need to take steps to address these issues. With proper management, organizations can manage the risk of corporate misconduct effectively, and assure all stakeholders that they are committed to doing the right thing at all times.”