EY's EMEIA Fraud Survey 2015 shows that many companies still have some way to go in achieving a strong ethical culture. Only a quarter of respondents rate their company’s ethical standards as “very good.” But the results show clear benefits where this is the case. Respondents who rate their ethical standards as “very good,” compared with those who rated their ethical standards as “poor,” are:

More than twice as likely to agree that negative financial performance is shared in an open and transparent way with head office.
More than four times as likely to be confident their company’s business operations in different countries meet the same ethical standards.
More than three times as likely to feel that unethical practices are noticed by head office.
At least a third less likely to have heard of revenues being recorded early, customers being required to buy unnecessary stock and underreporting of costs.

The results therefore suggest that effort focused on culture is going to reduce the risk of fraud and other conduct that could cause significant commercial damage.

Management - mixed signals

Our results emphasize the point that management has a fundamental role to play in bringing about cultural changes. In those organizations where respondents rate their ethical standards as “very good,” compared with those who rated their ethical standards as “poor,” management is clearly engaged.

Head office management team are more than twice as likely to be seen to understand the business environment that our respondents face.
Respondents are more than three times as likely to have frequently heard senior management communicate the importance of maintaining high ethical standards.
Senior management is more than twice as likely to have strongly communicated its commitment to anti-bribery policies.
Head office is more than twice as likely to be seen to be able to assess the reliability of a business unit’s financial results.

There is still a challenge facing senior management: they may be overestimating their impact. Senior managers think that they are better than they actually are at communicating the importance of high ethical standards. Forty-four percent of senior management respondents say they communicate this, but only 30% of other employees agree. Also, perhaps of greater concern, 27% of respondents say that they either have never heard senior managers communicate this message, or just don’t know.

What’s expected and what it takes

Overall, this year’s survey results deliver a strong message of support for those performing compliance-related roles. There are several examples of leading practice – such as the usefulness of anti-bribery training. Regulators, consumers and other external stakeholders expect more than just the basics. What is expected is an effective and sustainable integrity and compliance program underpinned by a culture of ethical business behavior.

Creating this requires significant investment. The responses from financial services organizations show how that investment can move the dial in the right direction, but respondents in these businesses also know how much effort has been required to achieve this.

For boards and shareholders, the message is clear: good compliance is not a barrier to growth. Nor is it optional. In the current environment, it is a critical component to sustain success for the organization, its employees and shareholders.