Economy
Corruption is rampant among Hungarian businesses - EY fraud survey
Businesses are facing increasingly complex challenges to growth — market volatility, geopolitical instability, oil shocks and economic sanctions. But businesses are also under tremendous pressure to achieve this growth, EY found, pondering if in such circumstances, is unethical growth the easy option for growth?
The results of EY’s survey of 3,800 respondents across 38 countries continue to show the significant risk of individuals acting unethically. Respondents display the human tendency towards rationalization of behaviors, ethical or not.
“The risks of fraud, bribery and corruption remain widespread and we continue to see businesses failing to mitigate these risks effectively," EY said.
It found that more than half of all respondents, and 61% of respondents in rapid-growth markets, believe that bribery and corruption is widespread in their country. The corresponding figure in Hungary is 73%. And yet 42% of respondents report that their company does not have an anti-bribery policy in place or didn’t know if there was one.
Thirty-seven percent of respondents believe that the financial performance of businesses in their markets is often overstated. The ratio in Hungary is 42%. And yet 20% of respondents feel their management team at head office does not understand the business environment that they face.
EZ’s results also highlight a specific concern regarding new business units.
“The pressure on these businesses to deliver growth is intense. These new business units appear more likely to consider bribery an acceptable response to this pressure. When asked whether offering cash payments is justifiable to help a business survive, new business unit respondents are more than 50% more likely to agree, compared with respondents from longer-standing business units."
Adding to this concern is the risk that poor results are less likely to be reported by new business units — and that unethical practices are going unnoticed:
In the survey, 44% of senior management respondents said they frequently communicate the importance of high ethical standards but only 30% of other employees agree.
42% of respondents say they don’t think their company has an anti-bribery or anti-corruption (ABAC) policy or don’t know if such a policy is in place.
Serious pressure on Hungarian companies to achieve growth
EY’s survey results show that most businesses are still expected to deliver new revenue growth. The question is — what risks are businesses willing to take to achieve this growth? 31% of respondents agree that management is under increased pressure to expand into higher risk markets. The Eastern European average is 52% and the corresponding figure for Hungary is 61%. Whereas 29% of the respondents in Eastern Europe said their management is under pressure to expand on high-risk markets, 41% of Hungarians share this view.
57% of respondents agree that managers are under increased pressure to create new revenue opportunities.
“Senior management is often working to forecasts based on a stable operating environment and optimistic expectations of future growth. In many cases, targets are unachievable. With nearly 60% of managers under increased pressure to identify new revenue opportunities, the options for growth may be hard to find. Continued pressure could result in actions that expose businesses to significant fraud and bribery risks," EY said.
42% of the respondents in Hungary believe that companies often report financial performance better than it is. This is 5% higher than the average in the whole region and markedly above the Czech Republic’s reading (29%), for instance. Nearly half of the companies in Hungary have anti-bribery policy in place and also about half of the respondents said their management is strongly advocating such policies.
More than two thirds of Hungarian respondents believe that bribery and other corruption cases are rampant in the local business. This is more than double the level recorded on developed markets, but it also exceeds the CEE level by 10%.
The results of EY’s survey of 3,800 respondents across 38 countries continue to show the significant risk of individuals acting unethically. Respondents display the human tendency towards rationalization of behaviors, ethical or not.
“The risks of fraud, bribery and corruption remain widespread and we continue to see businesses failing to mitigate these risks effectively," EY said.
It found that more than half of all respondents, and 61% of respondents in rapid-growth markets, believe that bribery and corruption is widespread in their country. The corresponding figure in Hungary is 73%. And yet 42% of respondents report that their company does not have an anti-bribery policy in place or didn’t know if there was one.
Thirty-seven percent of respondents believe that the financial performance of businesses in their markets is often overstated. The ratio in Hungary is 42%. And yet 20% of respondents feel their management team at head office does not understand the business environment that they face.
EZ’s results also highlight a specific concern regarding new business units.
“The pressure on these businesses to deliver growth is intense. These new business units appear more likely to consider bribery an acceptable response to this pressure. When asked whether offering cash payments is justifiable to help a business survive, new business unit respondents are more than 50% more likely to agree, compared with respondents from longer-standing business units."
Adding to this concern is the risk that poor results are less likely to be reported by new business units — and that unethical practices are going unnoticed:
- 26% of respondents from new business units state that negative financial performance is not shared with head office in an open and transparent way;
- 21% of respondents agree that unethical practices in their business often go unnoticed by head office.
In the survey, 44% of senior management respondents said they frequently communicate the importance of high ethical standards but only 30% of other employees agree.
42% of respondents say they don’t think their company has an anti-bribery or anti-corruption (ABAC) policy or don’t know if such a policy is in place.
Serious pressure on Hungarian companies to achieve growth
EY’s survey results show that most businesses are still expected to deliver new revenue growth. The question is — what risks are businesses willing to take to achieve this growth? 31% of respondents agree that management is under increased pressure to expand into higher risk markets. The Eastern European average is 52% and the corresponding figure for Hungary is 61%. Whereas 29% of the respondents in Eastern Europe said their management is under pressure to expand on high-risk markets, 41% of Hungarians share this view.
57% of respondents agree that managers are under increased pressure to create new revenue opportunities.
“Senior management is often working to forecasts based on a stable operating environment and optimistic expectations of future growth. In many cases, targets are unachievable. With nearly 60% of managers under increased pressure to identify new revenue opportunities, the options for growth may be hard to find. Continued pressure could result in actions that expose businesses to significant fraud and bribery risks," EY said.
42% of the respondents in Hungary believe that companies often report financial performance better than it is. This is 5% higher than the average in the whole region and markedly above the Czech Republic’s reading (29%), for instance. Nearly half of the companies in Hungary have anti-bribery policy in place and also about half of the respondents said their management is strongly advocating such policies.
More than two thirds of Hungarian respondents believe that bribery and other corruption cases are rampant in the local business. This is more than double the level recorded on developed markets, but it also exceeds the CEE level by 10%.
