The financial services sector boasts some of the strongest compliance programs, but that doesn’t mean it’s immune to fraud and corruption, according to global audit firm Ernst & Young Global Ltd.’s 15th EY Global Fraud Survey published on Thursday.
The financial services sector has the “most mature compliance programs,” the report states. By comparison, compliance is weak in the consumer products/retail/wholesale sectors.
However, the strength of the financial services compliance programs “does not correlate to reduced incidents of fraud and corruption” in the sector, the report states.
Indeed, 13% of financial services executives surveyed for the report said “it is common practice to use bribery to win contracts” in the sector; and 14% said their company had suffered a significant fraud in the last two years. The incidence of fraud and corruption in the financial sector outpaces the overall average, which is 11%, the report said.
Looking at the results for Canada specifically, cybersecurity is the biggest concern for Canadian executives. According to the report, 66% of Canadian respondents “believe a cyberattack is the biggest risk to their business,” which is well ahead of the 48% who cited possible regulatory changes as the biggest risk. On a global basis, 37% of executives said cyberattacks are their biggest risk.
“Recent high-profile data breaches and concerns over online privacy are creating new risks for Canadian businesses,” says Zain Raheel, fraud investigation & dispute services leader for EY Canada, in a statement. “Ongoing cybersecurity threats point to a critical need for rigorous and focused incident response plans to detect potential breaches and help minimize the occurrence of attacks.”
Additionally, “Canadian executives are failing to uphold corporate integrity,” the report said. The survey found that 80% of respondents said that their company has clear penalties for violating company policies, but only 46% said they know of employees who have been penalized for breaching those policies.
“There is a great opportunity for companies to demonstrate that they are living their values by enforcing corporate integrity and implementing stringent compliance measures,” adds Raheel. “Lack of enforcement, coupled with vague policies, sets the precedent that unethical behaviour may continue without consequences.”
According to the report, Canadian executives see public perception as the biggest benefit of demonstrating integrity (76%), followed by consumer perception (62%) and business performance (46%).
“Canadian companies don’t necessarily see the clear connection of how integrity can impact the bottom line,” says Raheel. “Understanding the connection between integrity and business success is crucial to building the case for investment in anti-corruption and cyber capabilities — especially as many businesses prioritize their digital agenda through the rapid adoption of disruptive technologies and advanced analytics.”
The global survey results are based on interviews with 2,550 executives (primarily chief financial officers, chief compliance officers, general counsel and heads of internal audit) from 55 countries and territories, which were carried out between October 2017 and February 2018.